Can a Deemed Roth Election Be Used by a 457(b) Plan?

Q: We are a public university that sponsors both a 403(b) and 457(b) governmental plan. In order to properly administer the new mandatory Roth catch-up provision of the SECURE 2.0 Act of 2022, we wanted to use a deemed, or spillover, Roth election for both plans, where deferrals in excess of the 402(g) deferral limit would be deemed Roth contributions for those earning in excess of $145,000 (indexed) in prior-year FICA wages, without separate Roth deferral elections being required for such individuals. However, our recordkeeper informs us that we can use the deemed Roth election for our 403(b) plan, but not for our 457(b) plan. Is our recordkeeper correct?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: Unfortunately, your recordkeeper is indeed likely correct. The final catch-up regulations permit such a deemed Roth election for 403(b) and 401(k) plans—but there is no guidance for 457(b) plans. If you are interested in implementing deemed Roth elections for your 457(b) plan, the best course of action would be to consult experienced ERISA counsel.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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