457 Plan Assets - risk to participants?

[waid10]

Hi all,

If a hospital maintains a 457 plan, does that hospital have access to participant funds in the event the hospital becomes insolvent? I thought that was the whole risk with a 457 plan. However, someone told me that once the assets are in a trust, they are basically untouchable.

Please help. Thanks.

[Everett Moreland]

I assume you're talking about a 457(b) plan, not a 457(f) plan. If the hospital is a non-governmental 501©(3), the assets cannot be in trust; they must be part of the hospital's general assets. If the hospital is a local government, the assets must be in trust and are not available to the hospital.

[waid10]

Sorry, yes it is a 457(b) plan. It is a non-governmental 501©(3) hospital. The trust is a grantor trust (not a group trust), I believe just as a means to set aside money to provide the hospital with a source of assets to assist in meeting its liabilities under the Plan.

Even if the assets are in trust, aren't the assets (by nature of a 457(b) plan) subject to the hospital's creditors should the hospital become insolvent?

[Everett Moreland]

For the plan to qualify under 457(b), the assets must be subject to the hospital's creditors should the hospital become insolvent.