Multiple Employer Governmental 457 Plan

[oldman]

Is it possible to have a multiple employer governmental 457 plan? For example, numerous municipalities wish to consolidate their benefits and regionalize for purposes of 457(b) plan sponsorship. How would such a plan be structured? Would it be suffice to have one plan document and each adopting employer execute a joinder agreement signifying their adoption of the plan identifying any plan provisions that deviate from the standard plan structure? Other than monitoring the deferral limits, are there any compliance and recordkeeping issues that would need to be addressed?

[TLGeer]

Is it possible to have a multiple employer governmental 457 plan? For example, numerous municipalities wish to consolidate their benefits and regionalize for purposes of 457(b) plan sponsorship. How would such a plan be structured? Would it be suffice to have one plan document and each adopting employer execute a joinder agreement signifying their adoption of the plan identifying any plan provisions that deviate from the standard plan structure? Other than monitoring the deferral limits, are there any compliance and recordkeeping issues that would need to be addressed?

Yes, you can do something an awful lot like this. I am doing one right now for a cluster of church plans, using a retirement income account. You have to be careful because the 403 provisions on multiple employer plans only apply to qualified plans. The details of how to implement depend pretty heavily on the detailed facts and the preferred plan/investment design.

The idea of a single plan document and adoption agreements is certainly doable, with appropriate changes to the documents.

Tom Geer

[30Rock]

I think he is talking about 457 plans, not 403b plans. Since there is no testing involved in a governmental 457b plan, it seems a much safer design than a qualified plan MEA.

[TLGeer]

I think he is talking about 457 plans, not 403b plans. Since there is no testing involved in a governmental 457b plan, it seems a much safer design than a qualified plan MEA.

Yes, I had noticed that he is talking about 457(b). The key point here is that 413© doesn't apply, so that you have to renavigate the issues presented and handled under 413© and/or PEO plan structures as to qualified plans. This is true as to both 403(b) and 457(b) plans, and as to governmental 457(b) plans the issues are virtually identical.

Done properly, it is safer by far than a qualified plan trying to meet 413©. First, the rules are so much simpler than the general qualification rules. Second, if you do it right, you don't have to worry about cross-disqualification from one employer to another. Of course, this is true under 413©, simply by having separate plans under a single document, as well.

Operationally, the governmental 457(b) is most like a church 403(b) with a trust serving as a retirement income account. This means that the issues are essentially the same, even if the solutions vary slightly.

Tom Geer

[Guest dietpepsi]

Questions regarding multiple employer 457(b) plan. In my case, it happens to be a tax exempt 457(b) plan. If an executive changes from one participating employer to another, would this be a benefit event? And if they start participating in the plan under the new employer, would you change their date of employment to when they started at the new employer? I think you would and then you would only count the years at the new employer for the three years before NRA catch up? So I think it doesn't matter that it is a multiple employer plan, you would treat each employer as if they were on their own plan? What do you think?

Thanks!!

[mbozek]

Questions regarding multiple employer 457(b) plan. In my case, it happens to be a tax exempt 457(b) plan. If an executive changes from one participating employer to another, would this be a benefit event? And if they start participating in the plan under the new employer, would you change their date of employment to when they started at the new employer? I think you would and then you would only count the years at the new employer for the three years before NRA catch up? So I think it doesn't matter that it is a multiple employer plan, you would treat each employer as if they were on their own plan? What do you think?

Thanks!!

How does a multiple employer 457 plan for a NP operate since the assets of each plan sponsor are subject to the claims of that employers creditors. In a multiple employer plan are the assets segregated since the is no irrevocable trust exempt from the claims of the employer's creditors which has title to the assets?

[Patricia Neal Jensen]

I am interested in any ideas re this topic as well.   If I create a multiple employer 457(b) (all sponsoring entities are NFP's), are all assets at risk if one of the sponsoring employers declares bankruptcy?   Could I address that in a Rabbi Trust (I understand that the Rabbi Trust does not protect the assets from sponsor bankruptcy; my issue is  whether or not the bankruptcy of one of the sponsors puts all assets at risk?)

Thanks!

PNJ