457(b) Top Hat Start-Up

[oldman63]

A governmental hospital claims dual status in sponsoring a 403(b) plan.  They now wish to offer a tax exempt 457(b) top hat plan.  I am not sure they can.  Treasury Regulation Section 1.457-1(m) states "Tax-exempt entity.  Tax-exempt entity includes any organization exempt from tax under subtitle A of the Internal Revenue Code, except that a governmental unit (including an international governmental organization) is not a tax-exempt entity."  Although the hospital's administration of a 403(b) plan is due to their dual status , I believe the aforementioned regulation prevents them from offering a tax-exempt 457(b) top hat plan.

What do you think?

[Luke Bailey]

oldman63, both nongovernmental tax exempts and governments can have 457(b)'s, so I disagree. If this is a governmental entity, it must be funded and does not need to be "top-hat," since ERISA would not apply.

[Peter Gulia]

And the State's enabling statute that grants the government instrumentality power to establish and maintain a 457(b) plan might include provisions about which employees may or must be eligible.