Carol V. Calhoun

That's the way I read it.

The "unforeseeable emergency" rules of section 457(B) are actually tougher than the "hardship" rules of 401(k) and 403(B). For example, payment of college tuition or purchase of a principal residence could give rise to hardship distributions from a 401(k) or 403(B) plan, but would not be treated as an unforeseeable emergency in the case of a 457(B) plan. In the case of a 401(k) plan, the participant is not actually required to stop making deferrals. Rather, cessation of deferrals is treated as a safe harbor with respect to the requirement that the participant not have other resources to meet whatever immediate and heavy financial need the participant has. No such safe harbor exists in the case of a 457(B) plan.

Christine, you are correct.

Could I ask that you have the original poster post here? That way, he can elect to be notified when there are new messages here, rather than having to have e-mails sent to him. One of the advantages of the message board format is that everyone, not just the original poster, can benefit from any replies. Thanks!

So long as a governmental entity is maintaining the plan, and it is only for governmental employees, it is exempt from the Form 5500 regardless of whether it contains employee salary reduction contributions, employer contributions, or both. The more important question, though, is whether there is a 403(B) plan for non-administrative employees that at least permits employee salary reduction contributions. (The plan for the other employees need not provide for the match.) If not, the plan for administrators would violate the "universal availability" rule of Code section 403(B)(12), which is the only nondiscrimination rule that still applies to state and local government plans.

If it is an agency or instrumentality of the state, the "top hat" analysis doesn't apply. The "top hat" rules are used to determine whether a plan is subject to ERISA, and a governmental plan isn't subject to ERISA regardless of whether it is "top hat."

That is exactly the issue to which there is no answer. If pick-ups to a defined contribution plan are treated as employee contributions, the employee would have to make them in order to get any benefit. But if they are treated as employer contributions for USERRA purposes (as they are for tax purposes), the employer could have to make them up without reimbursement by the employee. (Because it is a defined contribution plan, the employer would not have to make up earnings and forfeitures, but would have to make up the contributions themselves if they were treated as employer contributions.)

There was an earlier, and quite detailed, discussion of this issue on the Church Plans message board. You can get to it by clicking on this link: http://benefitslink.com/boards/index.php?showtopic=2055

It would appear not, since section 457(B) does not list a plan termination as a distributable event. Of course, this leaves the question of what to do with the assets if a plan does terminate.

No problem! In fact, this was one of the reasons for Code section 414(h)(2) in the first place--to permit an entity to treat a contribution as an employer contribution for income tax purposes (and therefore as pre-tax) even if it was treated as an employee contribution (and therefore not deducted from compensation) for plan purposes.

The individual is no doubt referring to the "parsonage allowance" under IRC § 107. There have been some rulings to the effect that if a portion of the distribution (not exceeding actual housing expenses) is specified to be a parsonage allowance, the exclusion may be available under certain circumstances. (I spent some time advising rabbis myself, and was always amused at having to cite a provision for "parsonage allowances" for "ministers of the gospel," but that's life!)

No remedial amendment period is provided for 457(B) plans. Thus, at least in theory, all amendments have to be made before the period to which they relate. Also, determination letters are not available for 457(B) plans. In some instances, a 457(B) plan will apply for a ruling on its status, but this is much less common than getting a determination letter on a qualified plan. You'd have to look at individual state and local laws, but I am not aware of any that require obtaining a ruling on a 457(B) plan.

Everett, I'm sorry, I misstated that one, and I've edited my prior post to eliminate that statement. Employers do have to make up contributions to DC plans. They clearly do not, however, have to make up any voluntary employee deferrals, even if such deferrals are treated as "employer" contributions for tax purposes. (They also do not have to make up earnings and forfeitures.) The situation is somewhat less clear in the case of involuntary deferrals that are treated as employer contributions, i.e., picked-up contributions.

Okay, to recap: Physican works for University (clearly no control). Physican works for VA (again, clearly no control). Physican works for "Other" (may or may not be not for profit, and you do not specify who controls it). Physican has Schedule C income (from unincorporated 100%-owned private practice, and/or expert witness fees). Further assume that the University has both a 401(a) plan and a qualified plan; that each of the University, the VA, the physician's unincorporated business, and "Other" has a qualified plan; and that there is no relationship between the University and the VA. For purposes of applying the limit of 415© in the year 2002 (i.e., the lesser of $40,000 or 100% of compensation), the following plans would be combined: The University's 401(a) plan would not be combined with the 403(B), no matter what, because the physician is not in control of the university, and the 403(B) is always treated as a plan of an entity over which the physician has control. The VA's qualified plan would not be combined with either of the University's plans, or with the physician's Keogh plan, because there is no common control between the VA and either the University or the physician. The qualified (Keogh) plan the physician sets up based on his or her Schedule C income will be combined with the University's 403(B) plan, because the Keogh plan is maintained by a business over which the physician has complete control. The qualified plan maintained by "Other" will be combined with the University's 403(B) plan and with the Keogh plan only if the physician has control or is considered under 414 to have control over "Other" (e.g., if "Other" is an incorporated business, and the physician is a 50% shareholder of "Other"). The qualified plan maintained by "Other" will be combined with the University's qualified plan only if "Other" is part of the same controlled group as the University (e.g., if "Other" is a taxable research subsidiary of the University, or a tax-exempt organization with the same Board of Directors as the University). The qualified plan maintained by "Other" will be combined with the VA's qualified plan only if "Other" is part of the same controlled group as the VA (e.g., if "Other" is an instrumentality of the VA). The qualified plan maintained by "Other" will not be combined with any other plan if "Other" is a business completely independent of the physician, the University, and the VA (e.g., a publicly traded corporation). For this purpose, I am using "control" to mean any relationship described in Code section 414(B), ©, (m), or (n). Thus, my examples, above, are all merely examples, not complete statements of what relationships will give rise to control. I hope this makes things clearer. At the very least, it is obvious that the elimination of the maximum exclusion allowance has not necessarily made this area clear and simple.

The former is correct. Maybe I need to get another cup of coffee before I start writing too hard?

EGTRRA adds new Code section 415(k)(4), which confirms the continued existence of the rule in section 415(e) before its repeal: that a 403(B) plan is combined with a Keogh or other qualified plan of an employer controlled by the participant, but not by a qualified plan of the employer that sponsors the 403(B) plan, in applying the 415© limits. For pre-EGTRRA periods, there is an exception if a participant makes a C election. However, the C election will no longer exist beginning in 2002, since the maximum exclusion allowance is being repealed. Thus, a 403(B) plan will never be combined with a qualified plan of the employer which sponsors the 403(B) plan.

I don't think so, so long as the benefit remains forfeitable (as it has to be for a 457(f) plan). Under section 402(B)(1), Under section 83,

If the funds are actually distributed, they will be subject to both tax and any early withdrawal penalties. (The penalties would apply only to the extent that the distribution consisted of amounts attributable to amounts from qualified plans, 403(B) plans, or IRAs.) However, the constructive receipt rule is abolished. This means that amounts either left in the 457(B) plan, or rolled to an IRA or other plan, will not be subject to either the tax or the penalty. The new rules, however, apply only to distributions in 2002 or later. Thus, for example, if you are subject to tax on a distribution paid in December, 2001 (either because it is actually received, or because the participant had the unconditional right to receive it), you will not be able to avoid the tax by rolling the amount over in January, 2002.

Thanks for the citation, Ralph--I knew it was out there, but didn't have it handy at the time. (I know, after this many years, I ought to have the whole Internal Revenue Code memorized--but then again, they keep changing it on me.)

Yes, it is exactly the same, except that (a) the ACP test does not apply to church plans, or plans of state and local government, and (B) the ADP test does not apply at all to 403(B) plans, but they are subject to a separate "universal availability" rule under 403(B)(12).

You are right, contributions are not supposed to be able to be picked up if the employee has any right to receive the amount in cash rather than having it contributed to the plan. However, the IRS has taken a liberal position in a number of recent private rulings, holding that, for example, if an employee makes a one-time irrevocable election to purchase service credit under a DB plan, the cost of that service credit can be treated as picked up. Perhaps this would be a way to go about getting the contributions to be tax-deferred, especially given that USERRA provides for making up the contributions over a period set forth in the statute. Of course, private rulings aren't binding on the IRS unless they are actually issued to the particular taxpayer, so some caution may be indicated.

I agree with you. The requirement of a trust is found in 457(g), which applies only to 457(B) plans, and therefore would not apply to a 457(f) plan. At the same time, some employers may want to set up trusts under 457(f) plans. (Or perhaps it would be considered a 402(B) plan if it had a trust.) The thinking is that if you have to impose forfeitability requirements to avoid taxation anyway, why not give the participant the additional security of a funded plan?

Good question! Rollovers to other types of plans are limited to governmental 457(B) plans. However, before EGTRRA, direct transfers from one 457(B) plan to another were allowed. Does anyone have thoughts on whether one can still transfer from a private 457(B) plan to a governmental 457(B) plan? And if so, is any separate accounting required to prevent the governmental plan being used as a conduit for an otherwise impermissible transfer from a private 457(B) plan to a 401(a) or 403(B) plan?

Almost everything will be optional (and may require new plan language to implement). The two exceptions are (1) the new tax rules--penalties on early distributions and new rules for the taxation of distributions--for 457(B) plans, and (2) the requirement that a plan transfer the amount of a distribution eligible for rollover to another plan at the participant's election. There's an outline available at my site, which you can see by clicking on this link.

Here's a link to the IRS announcement that governmental retirement plans do not have to file Forms 5500. Note, however, that it applies only to retirement plans; it appears that a governmental flex benefits or premium conversion plan may have to file Forms 5500.