100% Deferral?

[Guest Zeus369]

With the recent regulation changes to 457 plans allowing 100% deferral, do plan managers have to allow for 100% deferral or is that just an option? What if a payroll system can't allow for 100% deferral? Are you in violation of any laws if you don't offer it? Can you set a maximum % less then 100??

Selecting 100% could open Pandora's Box in regard to other voluntary/involuntary deductions. Could some one please shed some light.

Thanks

:confused:

[jsb]

Hopefully your payroll system allows you to set "priority" levels regarding payroll deductions. Set 457 priority to last, which allows all other deductions to run and the 457 deduction to take whatever is left over. Whether or not you permit "100%" as a deduction amount, a fixed $100 deduction will not be taken if the employee has no money after other deductions are taken.

[Guest Zeus369]

Unfortunatly it's a 1965 mainframe payroll system written in batch COBOL. Can't really set the "priority" for several reasons. Do I HAVE to offer 100%???? 70%-75% works fine with the system.

Thanks for the info JSB.

[mbozek]

You can set your % at any number u want. 100% is merely the max. There is no minimum amt.

[Guest Zeus369]

I m looking from an employer standpoint... don't want to violate any laws. It's very unclear.

[mbozek]

I dont understand your reference to employer standpoint. State laws are preempted as they apply to NP plans subject to ERISA and there are no fed rules which limit amt of 457 deferrals. I dont know if any state have laws that limit amt of deferral to govt plans.

[Guest Zeus369]

We run a legacy COBOL system. It would be a mess to change all the code to allow for 100% deferral. As an employer we can only allow up to 75% without any problems. Any higher and it causes deduction elimination, when it get's to 457 it's all or nothing for a deduction. I am just curious if we HAVE to offer 100% if someone wants it.

Thanks for the help.

:confused:

[mbozek]

A deferred comp plan is established by an employer and the plan terms are a condition of employment for employees the same as the salary paid and job responsibilities. As previous posts have stated the maximum deferral % is 100% of comp but there is no requirement that the plan permit such a contribution. The employer can establish a lower % or a maximum $ amount if it is not feasible to do so and most er do not permit a 100% contribution because of other amounts that must be deducted e.g. FICA tax, 125 contributions, in NJ state taxes on deferrals, etc.

[Guest Zeus369]

THANK YOU!! That's the answer I was looking for.

Thanks for all your help again.