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Section 457(b) Plans provided by Tax-Exempt employers for their highly compensated employees and/or a select group of management employees (“Tax-Exempt 457(b) Plans”) are subject to required minimum distribution rules under Internal Revenue Codes Section 401(a)(9).
The SECURE Act[1] amended the required minimum distribution rules effective for plan years commencing after December 31, 2019 and requires that all retirement plans be amended to reflect the changes made by the Secure Act on or before the last day of the first plan year beginning on or after January 1, 2022 (i.e. December 31, 2022 for calendar year plans). Recently, the IRS extended the time for adopting these amendments until December 31, 2025 except for Tax-Exempt 457(b) Plans which still must be amended by the last day of the 2022 plan year!
While it is possible that the IRS will authorize an extended period for adopting SECURE Act amendments to Tax-Exempt 457(b) Plans, action should be taken now to determine whether a SECURE Act amendment is required for your Tax-Exempt 457(b) Plan. It is possible that the current plan document has no provisions that are inconsistent with the SECURE Act. This plan review should include consultation with the drafter of the Section 457(b) plan document or benefits counsel regarding preparation of a SECURE Act amendment by the due date.
[1] Division O of the Further Consolidated Appropriations Act, 2020, Pub. L. 116-94, 133 Stat. 2534 (2019), known as the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act).
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