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Special Catch-up Provision for 457 Plans

Q. I have a detailed question regarding the timing of the special catch up provision for 457 plans. Here are the facts:

  • NRA — 62.5;
  • plan year — begins on Sept. 30;
  • participant date of birth Oct. 13, 1955 — he turns 60 this year;
  • has $36,900 in underutilized amounts in prior years;
  • wants to put the special catch up in for years 2016, 2017 and 2018; and
  • he turns 62.5 years old on Apr. 13, 2018.
Does the special catch up follow the same rules as 401(k) catch up, where it is based on calendar year? If so, could you confirm that the special catch up would need to be made in 2015, 2016 and 2017 based on the facts? He wants to use it in 2016, 2017 and 2018.

Also with the $36,900 in underutilized funds, he is able to do the $36,000 in one year and then the balance of $900 the following year. He is not eligible to do the $36,000 for each of the three years before normal retirement, correct?

A. He will not be 62.5 until April 2018, since his birth month is October. Thus, if he has an under-utilized limit left, he could use the catch up in 2015, 2016 and 2017. I agree he will run out of under-utilized limit before then, and that you would use calendar years in these calculations.