Other arrangements to use along with a 403(b)

[Lori H]

A client maintains a 403(B) plan. An HCE maxes out and and the client is looking to offer this HCE a means to shelter more of her income. Would a Top-Hat be the best route? The HCE is 54 years old and earns approximately $130,000 annually. The plan is exempt under 501©(3).

[mbozek]

A 457(B) plan would permit the exec to defer an additional 12k in 2003 (increasing to 15K by 2006). All you need is a plan document- no IRS approval or 5500 reports are required. Total deferral for the exec is 26K. If exec works for an eligible employer defined in IRC 402(g) and has 15 yrs of service, an additonal 3k can be deferred in the 403(B) plan.

[Guest dietpepsi]

I thought a tax exempt 457 plan would need to file a 5500 or the one time alternative filing with the DOL. Do neither of these apply, in your opinion?

[mbozek]

The DOL filing fulfills the R & D requirements of ERISA.

[Lori H]

Thank you for your responses. However, I have another question. Are there standardized prototype 457(B) documents available?

[Guest dietpepsi]

There are not prototypes in the official sense of the word because the IRS does not issue opinion letters on 457 plans. However, service providers do have standardized documents that they use.

[FJR]

With a 501© organization that sponsors a 401(k), can the HCE contribute to a 457 as well. And do the same limits apply?

[mbozek]

The HCE can contribute 12K to a 457 plan in 03 in addition to the max deferral permitted to a 401(K) plan. However, there is no catch up for employees over 50.

[FJR]

mbozek, thanks for the response. Why no Catch-up if the employee over 50? Why not an additional 2,000?

[mbozek]

Because IRC 414(v)(6)(A)(iii) only permits an over 50 catch up for govt 457 plans. NP 457 plans have a catch up for the last 3 yrs before reaching retirement age under the plan.

[FJR]

Surely he can use the catch-up under the 401(k)?