Normal Retirement Age and Age 70½: Significance for Government 457(b) Plans

Prior to the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE), and the SECURE 2.0 Act of 2022 (SECURE 2.0), for state and local governmental employers sponsoring eligible 457(b) deferred compensation plans (457(b) plans), age 70½ was a significant age for the following plan provisions:

• First, eligible 457(b) plans were able to permit in-service distributions no earlier than age 70½.
• Second, retired 457(b) plan participants were required to begin taking required minimum distributions (RMDs) no later than April 1st of the year following the year they attained age 70½, and
• Third, 457(b) plan’s defined normal retirement age (NRA) was capped at age 70½ for purposes of the Special 3-year catch-up.

What Changes Did SECURE and SECURE 2.0 Make to the Significance of Age 70½?

1. Lower the In-Service Distribution Age

• The SECURE Act lowered the minimum age a 457(b) plan could permit a participant to take an in-service distribution from 70½ to 59½ for years after Dec. 31, 2019. This change aligned 457(b) plans with allowable in-service distributions already available in 401(k) and 403(b) plans.

2. Increase in the RMD Beginning Age 

• SECURE increased the age that triggered RMDs for 457(b) plans from age 70½ to age 72 with regard to plan participants who attained age 70½ after Dec. 31, 2019.
• Subsequently, SECURE 2.0 increased the age that triggered RMDs from age 72 to age 73 with regard to plan participants who attained age 72 after Dec. 31, 2022.
• SECURE 2.0 will again increase the beginning RMD age to 75 for individuals who have not reached age 73 by Dec. 31, 2032.

What 457(b) Plan Provisions Related to Age 70½ Did Not Change?

Normal Retirement Age (NRA): Neither the SECURE Act nor SECURE 2.0 made any changes to the definition of NRA applicable to the special 3-year catch-up for 457(b) Plan participants. Therefore, the maximum age that can be considered as NRA for purposes of electing the Special 3-year catch-up option is still 70½.

Discussion of Special 3-year Catch-up: 457(b) Plans are permitted to offer the special 3-year catch-up option to participants who have contributed less than permitted to the 457(b) plan in prior years and are within the 3-year period prior to the year they attain NRA as defined under the terms of the plan. This option allows an eligible participant to potentially contribute up to double the annual deferral limit in the three years prior to attaining NRA as defined in the plan, but not including the year a participant attains NRA.

NRA is the age defined in the plan document and solely utilized as a measuring period for administering special 3-year catch-up contributions. It is not considered a reason for a distribution under a 457(b) plan, nor the age a participant severed employment with the sponsor.

The 457(b) plan may define NRA as the earlier of*:

• age 65, or
• the age at which a participant could receive immediate unreduced retirement benefits from the sponsor’s defined benefit plan or money purchase plan, but in either case, no later than age 70½.

Application of the NRA rule: A plan document may provide for one NRA (e.g., 65 or 70½) or a range of ages within which the participant makes an election within that range of ages. An NRA is irrevocable once deferrals have been made to the eligible 457(b) plan utilizing the catch-up provision. 

*There is a special rule for defining NRA in a plan for qualified police or firefighters, because these participants are often eligible for retirement at a younger age than other workers.

Frequently Asked Questions

Q. Did SECURE or SECURE 2.0 increase the NRA maximum age of 70½ for special 3-year catch-up purposes?
A. No, the maximum age cap remains at 70½.

Q. What are the special 3-year catch-up options for a working participant that is over NRA as defined in the plan document?

A. The participant has the option of making contributions pursuant to a plan’s Age 50+ catch-up optiona

Q. If a plan defines NRA as age 70½, and a participant turns 70½ this year, can they contribute under the Special 3-year catch-up option?

A. No, because the Special 3-year catch-up option is only available in the 3 years prior to the year a participant attains NRA as defined in the 457(b) plan.

Used by permission.

Kim Solecki, CEBS, is a member of the VOYA Technical Services Team for Tax-Exempt Markets.