457(b) top hat and annuities

[30Rock]

IS there an issue in offering annuities as a payout option in a 457b tophat plan? The employer owns the assets and the assets are subject to creditors. It may be difficult to pay an irrevocable annuity to a participant while the assets are subject to creditors. Can anyone add some light to this?

Thanks!

[joel]

IS there an issue in offering annuities as a payout option in a 457b tophat plan? The employer owns the assets and the assets are subject to creditors. It may be difficult to pay an irrevocable annuity to a participant while the assets are subject to creditors. Can anyone add some light to this?

Thanks!

The assets are only subject to the claims of creditors during the accumulation period. Upon severance of employment the participant may roll the money over to an insurance company for the purchase of an immmediate payout annuity.

[mbozek]

IS there an issue in offering annuities as a payout option in a 457b tophat plan? The employer owns the assets and the assets are subject to creditors. It may be difficult to pay an irrevocable annuity to a participant while the assets are subject to creditors. Can anyone add some light to this?

Thanks!

The assets are only subject to the claims of creditors during the accumulation period. Upon severance of employment the participant may roll the money over to an insurance company for the purchase of an immmediate payout annuity.

There is no rollover option for a 457b plan of a non profit employer. Assets can only be transferred tax free to another non profit 457b plan. Only assets in a government 457b plan can be rolled over tax free to an IRA which can purchase an annuity.

[joel]

IS there an issue in offering annuities as a payout option in a 457b tophat plan? The employer owns the assets and the assets are subject to creditors. It may be difficult to pay an irrevocable annuity to a participant while the assets are subject to creditors. Can anyone add some light to this?

Thanks!

The assets are only subject to the claims of creditors during the accumulation period. Upon severance of employment the participant may roll the money over to an insurance company for the purchase of an immmediate payout annuity.

There is no rollover option for a 457b plan of a non profit employer. Assets can only be transferred tax free to another non profit 457b plan. Only assets in a government 457b plan can be rolled over tax free to an IRA which can purchase an annuity.

So what are the payout options upon retiring from a non profit employer?

[John Feldt ERPA CPC QPA]

The payout options are defined in the plan document, which could include, for example a lump sum or payments over a certain period as elected by the participant, or by a default option if no election is made. Payments to the participant are reported on the W-2.

A direct transfer from a non-profit 457(b) to another non-profit 457(b) is possible if both documents have appropriate language.

[joel]

During the payout period does the account balance remain subject to the claims of the employer's creditors?

[John Feldt ERPA CPC QPA]

Yes.

[joel]

So I guess the majority take the lump-sum settlement even though it is subject to immediate taxation.