Can a 501(c)(3) have a 403(b) plan and a 457 plan?

[Guest Rick Vessell]

I'm the CFO of a 501©(3) community mental health center with an existing 403(B) plan. We have 107 eligible employees with about 60 electing to contribute to the plan. We match 50 cents on the dollar up to the first 14% the employee contributes. Could we also maintain a 457 plan that would allow the employer to contribute on the behalf of a certain class of employees such as top management only? If so, could they participate in both plans and would the annual contribution limit be $ 8,000 for the combined plans instead of the $10,000 limit for the 403(B) plan? Where can I find more information on 457 plans?

[Everett Moreland]

For the 457 plan to comply with both 457(a) and ERISA, the plan could cover only "a select group of management or highly compensated employees."

Under current law, the $10,000 elective deferral limit still would apply to the 403(B) plan, but 403(B) contributions would reduce the allowable $8,000 457 contributions dollar for dollar. Also prior years' 457 plan contributions would be used to calculate the exclusion allowance. Pending legislation, which has a good chance of passing, would change those rules. Both the full 403(B) limit and the full 457 limit could be used. This legislation also would repeal the application of the exclusion allowance for 403(B) plans, making them subject to only the $10,000 elective deferral limit and the 415 limit.

You can find more information on 457 plans by download the IRS FY 99 training materials at http://www.irs.ustreas.gov/prod/bus_info/eo/topici.pdf