457b with 401a for Match Plan Document question

[JoyHodgson]

I have a governmental entity setting up a 457 plan and wants to provide a match as well.  We are planning to have a paired 401(a) plan so  employees get to defer up to the 457 contribution limit each year.  For the document , does the 401(a) document just have the employer non-elective language with each person being in their own rate group?  In that case, the client will fund the match contributions only for those who made 457 deferrals, and since governmental entities are not subject to nondiscrimination - your allocation amount doesn't have to satisfy any testing.   I may be overly complicating how to draft the 401(a) vs 401(m) document items.    It doesn't seem like my 401a plan needs any matching contribution language since that plan will not have an deferrals. 

[Carol V. Calhoun]

Rather than having a separate rate group for each person, it would be simpler just to provide in the 401(a) plan that it will match contributions to the 457(b) plan. So long as you identify the 457(b) plan involved (so as to preclude employer discretion) , this would not be a legal issue. 

[jpod]

Probably setting up an elective deferred comp plan under 457(b) is not a problem.  Does the employer entity have the authority (under whatever law is applicable) to set up a plan requiring employer contributions?

[JoyHodgson]

2 hours ago, Carol V. Calhoun said:

Rather than having a separate rate group for each person, it would be simpler just to provide in the 401(a) plan that it will match contributions to the 457(b) plan. So long as you identify the 457(b) plan involved (so as to preclude employer discretion) , this would not be a legal issue. 

Thank you for your response and that does seem an easier approach.

[JoyHodgson]

2 hours ago, jpod said:

Probably setting up an elective deferred comp plan under 457(b) is not a problem.  Does the employer entity have the authority (under whatever law is applicable) to set up a plan requiring employer contributions?

I'm not sure I follow exactly your question, but this particular entity has approval from their governing board to establish a 457b plan and with a matching contribution from the entity.  The match contribution formula is discretionary and we anticipate the board will approve the continuation of the matching formula each new FY.

[jpod]

I think you understand the question.  My follow up question is does the governing board, as you described it, have the authority to do this?  One would hope that the board members know the answer, but they may not.

[Peter Gulia]

Under many States' laws, a governmental employer might lack power to provide a contribution beyond salary-reduction contributions.

If questions of that kind are beyond your engagement scope, consider whether it serves your interests to suggest that the governing body get its lawyer's advice.

 

[OKC73134]

If utilizing a  401a prototype document under the Matching Contribution - Formula there should be an option that reads similar to this -

The following contributions are Matched Employee Contributions:

   "Contributions made under the following 403(b) and/or 457(b) plan(s)of the Employer shall be included in the definition of Matched Employee Contribution" and it allows you to enter the name of the 457b or 403b plan name.

Under Plan Features just select Marching Contributions

Our TPA firm has found a large variance in state laws and several states that are silent in this area or specific only to certain governmental entities or arms.   We always suggest to the Plan
Sponsor to consult an ERISA attorney in that same state.