Coordination of 457 and 403(b) deferrals

[Guest Matthew]

Please forgive me if this topic has already been addressed at length. My question relates to how deferrals in a 403(B) and 457 - both sponsored by a governmental agency - are supposed to be handled.

Now, I am not a governmental plan expert, so bear with me. Several years ago there was a permanent moratorium on discrimination testing on all governmental plans. I have recently run into a governmental agency that was allowing their employees to max-out in both plans, ingoring the coordination requirement. Had I not seen something like this before, my knee jerk reaction would have been that this was clearly an error.

However, I have researched this, and I am looking for some feedback on whether what I have found is accurate.

First, there is no question that deferral and contribution limits of 403(B) and a 457 sponsored by a non-governmental agencies must be coordinated. But what if the plans are sponsored by the same governmental agency? For example, under Treas Reg 1.457-2©/(e)(2), it appears that a governmental 457 must coordinate benefits with a 403(B) ONLY if the 403(B) plan is sponsored by a 501©(3) organization. So it appears to me that if a 403(B) is sponsored by a governmental agency, then the employees of said agency could contribute $10,500 to the 403(B) and $8,000 to the 457 - if all other limitations are satisfied. I want to know if any of you have looked into this, and whether this is possible.

Your thoughts and feedback would be greatly helpful and appreciated.

Matt

[QDROphile]

The limits are coordinated. Look at the IRS Examination Guidelines for Section 403(B) Plans, Part V and Example 9 in particular. Carol Calhoun published the Guidelines on her website.[Edited by CVCalhoun on 09-06-2000 at 12:32 PM]