Medicaid providers as 457 participants

[Guest EditInIllinois]

A state legislative staffer has asked whether any state lets persons who are not employees or usual kinds of contractors participate in its 457 deferred compensation plan. The staffer specifically mentioned Medicaid providers (presumably physicians and other professionals who contract as individuals with the state Medicaid agency). I think that doing so might require an unusual interpretation of the law and regulations for 457 plans. But it doesn't seem out of the question, since such providers MAY be "independent contractors" under IRC subsection 457(e)(2). If anyone knows of a state that has tried this or any similar expansion of 457-plan eligibility, I would like to know about it. Thanks.

[TLGeer]

Do Medicare providers "perform service for the employer"? Nothing helpful in the Regs.

In form, the Medicare provider performs services for the patient, and is paid by Medicare in the same way they would be paid by Blue Cross for another patient. I doubt the idea works, and would not recommend trying it absent a ruling from the IRS.

[Guest EditInIllinois]

Mr. Geer:

Thank you. The lack of other responses suggests that no state has tried what I described. (An administrator for another benefits-oriented message board posted basically the same question for me, and got only negative replies.)

Do Medicare providers "perform service for the employer"? Nothing helpful in the Regs.

In form, the Medicare provider performs services for the patient, and is paid by Medicare in the same way they would be paid by Blue Cross for another patient. I doubt the idea works, and would not recommend trying it absent a ruling from the IRS.

[Guest mjb]

A state legislative staffer has asked whether any state lets persons who are not employees or usual kinds of contractors participate in its 457 deferred compensation plan. The staffer specifically mentioned Medicaid providers (presumably physicians and other professionals who contract as individuals with the state Medicaid agency). I think that doing so might require an unusual interpretation of the law and regulations for 457 plans. But it doesn't seem out of the question, since such providers MAY be "independent contractors" under IRC subsection 457(e)(2). If anyone knows of a state that has tried this or any similar expansion of 457-plan eligibility, I would like to know about it. Thanks.

Your question ignores the tax law which permits independent contractors such as DRs to establish their own retirement plans and contribute up to 20% of net earnings from self employment or $46,000 (51,000) if age 50 and the funds are under their investment control. Larger amounts can be contributed if the DR establishes a defined benefit plan.

What is the purpose of establishing a 457 plan and who would be the sponsor? And who would control the investments?

[Guest EditInIllinois]

To mjb:

I was aware that there are other options for highly paid professionals to have tax-deferred investment accounts. As my original post indicated, the question was not from me, but was asked on behalf of a state legislative staffer. I do not know the reasoning behind it. To repeat, the question is whether any state lets persons such as Medicaid providers PARTICIPATE in its 457 plan. It is not about establishing a new 457 plan.

[GBurns]

Some contractors, yes, Dr's and Medicaid providers, probably not.

The State of Florida and a few of our large counties use what is supposed to be a standard 457 that is also used by many other entities across the US. Eligibility is limited to persons including those under contract "and who provide a service for the State of Florida for which compensation or statutory fees are paid by the state may participate in the Plan".

The problems with your scenario start with the definition of "persons". In my experience Medicare providers are coprorate entities of various sorts and are not individuals. My opinion is that "persons" means individuals. Most Drs operate as a business entity.

Then there is the issue of to whom is the compensation paid ?

[Guest EditInIllinois]

Surprisingly, I have now received information (partly confirmed as described below) that at least three states (Arkansas, Louisiana, and Mississippi) do allow Medicaid providers to participate in their section 457 deferred compensation plans. Mississippi personnel with whom I spoke emphasized that this is allowed ONLY for Medicaid providers who use Social Security numbers to receive state reimbursements—thus, only solo practitioners and sole proprietors can participate.

The following Arkansas Web page also says that individual Medicaid providers can participate in its 457 deferred compensation plan:

https://www.medicaid.state.ar.us/InternetSo...q.aspx#deferred

I left a message with Louisiana's Deferred Compensation Plan seeking confirmation that it offers this option.

Does anyone know of a way to find other states that do this?

[GBurns]

Be careful. As I pointed out Florida which uses standard wording refers to "persons".

Many solo practitioners and sole proprietors use dbas. These most likely are not able to participate even if they use their SS but are dba. The operating entity must be the same as that receiving payment and in Florida must be a person. A dba can never be a person even if SS# is used.

[EmployeeofMD]

Can a provider of MS Medicaid participate in 457 Deferred Compensation even if he bills using a group name and group NPI? If so, what paperwork does he need to complete? Or does it only allow for individual providers to contribute? Any help is greatly appreciated.