Combined 457(b) and 401(a) Plans

[DaddyRabbit]

I have a new governmental client that sponsors a 457(b) plan and a 401(a) plan.  To my surprise, these two plans are contained in the same document.  My question is whether you can combine a 401(a) plan and a 457(b) plan in the same document or must they maintain separate instruments.

[QDROphile]

Documents are just pieces of paper, and not always that.  It depends on what is written on the pieces of paper, such as which terms are identified as composing which plans. The number of staples does not the number of plans determine.  However, not all IRS or DOL agents understand this. Yes, the reference to DOL is gratuitous in this case.

[Peter Gulia]

I have written documents that state in one document multiple plans and related trusts (or trust substitutes), including for plans under Internal Revenue Code sections 401(a), 401(k), 403(b), 415(m), and 457(b).

This can work with careful attention to accounting for:

·           each trust, and each subtrust;

·           each kind of plan;

·           within each plan, each benefit structure;

·           each source of salary-reduction, matching, nonelective, rollover, and transfer contributions;

·           each kind of loan, distribution, transfer, or other payout.

Using one document for multiple plans might face difficulties with investment issuers and intermediaries.  Those difficulties don’t arise or are readily resolved if those businesses trust the plans’ counsel.

[Luke Bailey]

On 4/10/2021 at 5:27 PM, QDROphile said:

However, not all IRS or DOL agents understand this. Yes, the reference to DOL is gratuitous in this case.

 

10 hours ago, Peter Gulia said:

Using one document for multiple plans might face difficulties with investment issuers and intermediaries. 

Completely agree with QDROphile and Peter Gulia, but why bother? I would recommend separate documents for a host of practical reasons.

[Peter Gulia]

Stating everything about retirement savings in one document can, in the right circumstances, get efficiencies and convenience.  But even more important, it can help an employer avoid outright errors in expressing the plans’ provisions.  And looking to one document can improve a governmental employer’s administration of its plans.

Which methods, including about documenting plans, make sense turns on the particular facts and circumstances of the plans’ provisions, investment alternatives, service providers, and the employer/administrator.