457 transfer

[Guest denali52]

I work for a city government, I contribute to a 457 dc. My employer contribute's, on my behalf, to my union's defined benefit

retirement plan. Assuming approval from union trustee's I would like to know if I can do a direct before tax transfer of any or all of my 457 balance to my Union's retirement fund with the objective of purchase additional service credit. The union defined benefit plan is a multi-employer type plan if this makes any difference. The possibility of such a process is a very big deal with the guys I work with at the puplic works dept.

I greatly appreciate any information.

Thank you.

[jlf]

Deaar Denali,

As a city employee why doesn't your employer pay into a Defined Benefit pension plan administered by the State or City government? It is unusual for a city government to contribute to a union administered plan. Please amplify.

Best wishes,

Joel L. Frank

[Guest denali52]

I'm sorry I should have included that the city did contribute to Public Employee's Retirement System , a defined benefit retirement plan administered by the state for state and municipal government employee's, however we ( puplic works employee's) were allowed to "opt" out of the PER'S and have the city contribute to our Union's defined benefit plan.

[jlf]

Don,

Effective for years after December 31, 2001 the Economic Growth and Tax Relief Reconciliation Act of 2001 allows employees of state and local governments to use their 403(B) and 457 funds to puchase allowable prior service credits in their governmental Defined Benefit plan. It will be interesting to see if you can do this notwithstanding the fact that your governmental unit uses the DB plan of your union in lieu of a governmental administered plan. Maybe this will be addressed in the Technical amendments to the legislation.

Don, let's assume it will be permitted. Is the DB plan contributory (employee and employer contributions) or non-contributory (only employer contributions)?

Best wishes,

Joel L. Frank

:confused:

[jlf]

Don,

You are doing just fine. We will walk you through this maze.

First, determine from your union how the DB pension is computed. For example: Years of service X 1.5% X Average of Last Five Years' Salary. This is called the DB pension formula. Let's assume the following: 30 years X 1.5% X $45,000. If we do the arithmetic we arrive at a lifetime pension of $20,250.

Please post your formula on this site.

Next, and this is very important, find out from the union if the emplyee's contribution is used to help finance this DB pension or is it used to finance a separate lifetime annuity inside of the DB plan. I look forward to your response.

Best wishes,

Joel L. Frank

[Guest denali52]

It is non-contributary . $ per hour contributed times total reported hours for the year times 2.50%= monthly benefit.

Our contributions help finance the DB pension, I think. I haven't been given a definitive answer yet.

[jlf]

Don,

Please clarify: Do you contribute to the Defined Benefit plan?

Joel

[Guest denali52]

Yes. My employer takes money out of my check and at the end of every month sends it to my Union's retirement plan. All I'm interested in is an opinion of my origonal post on this forum! I appreciate your comments.

[jlf]

Don,

We are almost there---how many years of service do you have in the DB plan? What is your current age? How many years of service does your plan require in order to receive a pension? What is the plan's retirement age?

Best wishes,

Joel L. Frank

[Guest denali52]

18 YEARS OF SERVICE, i'M 52 YEARS OLD, 5 YR. VESTING, 50 YEARS OLD EARLY RETIREMENT, 57 NORMAL.

CORRECTION, The dollar amount contributed to our Union's db plan is part of our negotiated wage and benefit package

[jlf]

How many years are you eligible to buy back?

[Guest denali52]

That has yet to be determined, basically we are pursuing the purchase of permissive service credit.

[jlf]

Once you determine the number of years you will buy back and your age at that time you will be in a better position to calculate if in fact it pays to make the purchase.

Please keep in mind that 457 funds do not have to be annuitized in order to generate retirement income while funds used to buy back service will be used to increase the Defined Benefit pension (fixed annuity) which is lifetime annuitization. This means you have transferred the title to the 457 funds, used to make the purchase, to the Defined Benefit pension plan. In return you get an increased lifetime pension. In the final analysis it may or may not be in one's best interests to buy back.

When you and your colleagues are ready to make the decision get back to us and we will do the analysis based on the individual's personal record and financial circumstances.

Best wishes,

Joel L. Frank

[Guest denali52]

Thank you very much.

[Guest denali52]

Well after several months of discussion with our Union trustee and the IRS. Transfer of govermental 457 plan funds to a private sector multi-employer plan will not be allowed per the IRS. so on to other things.

[Carol V. Calhoun]

Out of curiousity, why is the union plan considered "private" if your governmental employer contributes to it? Does it cover workers in the private sector as well as public employees? If not, union involvement should not by itself make the plan "private."

[Guest denali52]

Perhaps "private" was a poor choice of words. Some time ago our group of city employee's "opted out" of Puplic Employee Retirement system. At our request the City began contributing to our Union's retirement plan. Our Union's retirement plan is a multi employer plan. with the exception of our small group of govenment employee's, recieves contributions from private construction companies per requirments of collective bargining agreement. Our union is a "constuction Union" that not only provides workers to employer's in the constuction industry but also provides workers for the City puplic works department. Which is where I work. I got started with this whole thing because of changes brought about by enactment of the EGTRRA of 2001. Our employer did not have a govermental defined benefit retirement plan that we could possibly transfer funds from our 457 defered comp plan to. So I thought perhaps we could transfer to the only defined benefit retirement plan we have which happens to be our constuction Union's plan. I thought it was an interesting idea, this has been interesting but I'm glad I drive a truck for a living. Hope I haven't been too long winded. Thankyou for you interest.