457 SPD needed or not?

[Guest mgreen2]

We are looking at adding 457 options for our employees of a public school system. We offer 403b plans but don't have a SPD or any written plan as it is not required by 403b rules. We have several vendors who provide TSA products for the 403b plan.

Are we required to have a written 457 plan? If not, how do we handle the requirement for 457 contributions being put into a trust? Our 403b vendors sign a TSA plan agreement and hold harmless but there is no requirement for those funds going into a trust.

If no written 457 plan is required for public school employers as is the case with 403b plans are there sample 457 vendor agreements available?

[Guest Tom Geer]

I am assuming from your content that you are governmental, which means you don't technically have to have an SPD. You do need a plan document, but these are thin on the ground.

I have a 457 plan document which I am going to make available in the next few months as a quasi-prototype. My charge for producing a plan, trust and SPD-equivalent explanation is $400.

457s can't be prototypes, so you may want to get an IRS ruling letter, wherever the document comes from. I can give you details on that, if you want.

[Guest mgreen2]

Yes, we are a public school system.

So to start a 457 we must have a written plan? What about an actual trust account? Can we somehow put the trust requirement in our vendor agreement and say they are holding the funds in a trust? Our idea was to offer the standard 403b fare of vendors and investments.

[Guest Tom Geer]

That's a function of the level of professionalism of the vendor. I will tell you up front that the more work you try to shift off the the investment provifer, the higher an expense load the plan will carry and ther lower the actual yields will be.

[Guest KCW]

mgreen2,

I work in the finance department of a municipal utility district.

I am responsible for the administration my employer's state and local governmental 401(a) DB and DC plans as well as our 457(B) plan.

My employer uses three vendors to provide trust and record keeping services for our 457(B) plan.

We use three vendors in order to offer our employees the widest range of investment products. Each one of our vendors holds all participant assets in a trust account.

All three of our vendors furnish model plan documents, trust agreements, summary plan descriptions, enrollment kits, retirement packs, participant communication, and brochures as well as all necessary forms.

As far as the trust goes, once it was adopted by our district governing body, its operation has been transparent. We simply adopted (signed) each vendor's trust agreement, then every payday we wire or mail a check to the vendor along with an electronic or printed remittance advice listing the amounts to be credited to each participant's account. When a employee wants to make a change in deferral amounts or take a withdrawal, the employee fills out a form, we approve it, and submit it to the employee's vendor. The vendor then makes the change in their record keeping system, or initiates payments as the case may be.

I have no experience with TSA's, but I'll bet the services, costs, and procedures associated with most 457(B) vendors would be similar to those you already employ in your 403(B) TSA.

I'd be happy to give you a schedule that breaks out the charges each of our vendors assess our participant accounts for management fees (we publish these schedules for our employees).

It's true, the more services you offload onto the vendor, the higher the fees assessed to your employees. Also, the larger the asset base your participants build, the more favorable the fee structure will be.

We avoid significant mangement fees by assuming responsibility for the administration of our plan.

I'd be glad to share my thoughts on the services and products that I am aware of out there for 457(B) plan sponsors.

If you are interested in more information, contact me at the e-mail address below.