Mandatory Contributions

[Guest khartford]

Can a governmental 457(b) plan include a provision requiring mandatory (pre-tax) deferrals?

Thanks.

[ETA Consulting LLC]

Not really, but the government can fund a contribution to the plan. That contribution will fall under the $16,500 limit ($22,000 with catchup) and is treated as if the employee made the deferral. I am not sure if, semantically, you would consider that a mandatory contribution.

Good Luck!

[Guest khartford]

Not really, but the government can fund a contribution to the plan. That contribution will fall under the $16,500 limit ($22,000 with catchup) and is treated as if the employee made the deferral. I am not sure if, semantically, you would consider that a mandatory contribution.

Good Luck!

So, is this like a pick-up contribution? Pick-ups can only be used in 401(a) plans, right? The way this plan is designed is to require participants to make a 3% contribution as a condition of employment and that contribution falls under the 402(g) limit you mention.

[Guest khartford]

Can we simply characterize the mandatory contribution an employer non-elective contribution under 1.457-2(i) for tax purposes?

[ETA Consulting LLC]

It is still treated as an 'annual deferral' under 1.457-2(b). This will mean that regardless of where the funds originate, it is (for tax purposes) treated as if it were compensation that was deferred (at least that appears to be the source of the argument). I think I know what you are getting at, but do not believe the taxability changes depending on whether it was a nonelective contribution or 'elective deferral'. At any rate, good question.

Hope this helps.

Good Luck!

[QDROphile]

What about FICA?

[Guest khartford]

What about FICA?

These contributions would be subject to FICA/FUTA, but no income tax withholding.

[Guest khartford]

It is still treated as an 'annual deferral' under 1.457-2(b). This will mean that regardless of where the funds originate, it is (for tax purposes) treated as if it were compensation that was deferred (at least that appears to be the source of the argument). I think I know what you are getting at, but do not believe the taxability changes depending on whether it was a nonelective contribution or 'elective deferral'. At any rate, good question.

Hope this helps.

Good Luck!

I think you are correct regarding the tax treatment (that it's the same). I made the suggestion because it seems like there's an aversion to mandatory deferrals in these plans, but to me, it seems like 6 of one and half dozen of the other.