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Throwing around "Qualified" in relation to 457 deferred comp


Guest Monster
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Guest Monster

I'm going to be wrong somehow on this - as I'm only aruging with myself on this point.

It was generally held around here that a qualified plan was one that:

- was tax deductible

- was eligible to be transferred to another qualified plan

- was eligible to be rolled over into an IRA

A 457 can only be moved from one 457-plan to another. It can never be rolled into an IRA (though there were two recent attempts to change that which were vetoed by President Clinton) and it's contributions, while tax deferred, are not tax deductible.

So when we say that a Deferred Comp Plan is "Qualified"......help me out here...someone...

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I use a different definition of "qualified plan" than you. In my opinion, a qualified plan is one that meets the requirements of a particular section (or sections) of the internal revenue code. Pension plans, for example, must meed the requirements of section 401(a) in order to be considered "qualified."

Following that line of reasoning, a 457 plan is a "qualified" deferred compensation plan because it meets the requirements of IRC section 457.

This may not be right, but it helps keep things clear in my simple little mind. Hope it is of some benefit to you.

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  • 4 weeks later...
Guest Jeff V

Since I don't deal with government plans, this may or may not help. The general term "qualified plan" is a retirement plan that has received a determination letter from the IRS which states the plan is qualified for purposes of tax deferral. To be qualified, a plan must meet the conditions of IRC 401(a) and all references it incorporates.

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I think Michael is right. Technically, a governmental plan is "qualified" only if it meets all of those requirements of section 401(a) which apply to governmental plans. (The plan need not have a determination letter -- and many governmental qualified plans do not -- so long as it meets the requirements.) However, people often use "qualified" more loosely, to refer to any plan (401(a),403(B), or 457(B)) which has favorable tax status.

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