Tandem 457(b)/457(f)

[kgr12]

Does anyone have familiarity with a tax exempt employer operating a 457(B) and 457(f) plan in tandem with each other under the same or separate documents?

The basic concept is to allow contributions to the tandem arrangement which are in excess of the 457(B) limits for a single year, credit and vest the amount equal to the 457(B) limit for the year to the 457(B) plan with the balance credited (but unvested) to the 457(f) plan. In a future year, to the extent that the individual has not exceeded the 457(B) limit for the year, amounts previously credited to the 457(f) plan would be credited to the 457(B) plan.

The proposed regulations seem to suggest (1.457-4(e)(1)) that this would be permissible (even under a single plan document) so long as the excess remains subject to a substantial risk of forfeiture (i.e. the standard for remaining tax deferred under 457(f)).

Thanks for any insight anyone has to offer.

[mbozek]

There is no reason why one document cant be used for both plans provided that there is recognition of the differences in taxaton/distribution of benfits, e.g., 457b plans are taxed under the 401(a) (9) rules, 457f plans are taxed under the constructive receipt rules, Fica taxation is diffferent, etc. In a txo the participants in both plans are the same, e.g., members of the top hat group.