New 457 Plan Ideas

[Guest Gretchster]

I work for a non-profit company that currently has a 403(b) plan and wants to add an additional benefit for certain members of management. We have considered adding a 457(b) plan, but the $15,000 contribution limitation could be less than the amount that the company wants to contribute to the management staff. I have read the code on 457(f) plans and the 409(a) issues, as well as almost every post I could find on this site regarding 457 plans.

My questions are as follows: If you could develop your own plan, which direction would you head, what would you want written in the plan for Substantial risk of forfeiture and how would you want the distributions to be paid. I'm looking to develop the ideal plan and am looking for ideas. Basically...what's your dream plan?

Thanks in advance for your input.

Gretchen

[Locust]

You'd want to start with the eligible plan to the extent of the limits because you avoid the deferred compensation/constructive receipt issues - it makes it much easier for the executive to have a 457(b) benefit.

If that isn't enough, you would add on top of that the 457(f) plan. But as you can tell from the posts on this topic, there are many questions about how these will work with ss 409A. To be safe I think you'd have to have a substantial risk of forfeiture that meets ss 83 standards - basically a real risk of forfeiture conditioned on continued employment - no vesting contingent on bogus consulting agreements or noncompetes, or rolling forfeitures. But you should probably wait like everyone else for additional guidance on 409A and 457.

[mbozek]

How much do you want to contribute? EE 403(b) salary reduction is 14k (18K for over 50) plus 14k for 457b plan. 457(f) can provide for additional deferred comp which is subject to substantial risk of forfeiture. However total benefits must not be subject to excess benefits tax under IRC 4958. Only members of the top hat group can participate in the 457 plans. You need to retain competent tax counsel to advise you. Substantial risk of forfeiture will be defined under IRS regs to be issued later this year.

[Guest Gretchster]

We'd like to contribute more than $15,000 to at least 2 of the 12 members of the management group. Perhaps the company should first contribute $15,000 to a 457(b) and then put any excess into a 457(f) for just the 2 members.

Thanks for your ideas.

Gretchen