457b and 401a Plan for Township

[Nic Pospiech]

I have a Township who currently offers a 401a plan to it's full time employees.  They want to create a plan that offers match, but only for the part time employees - excluding the individuals who are eligible for the 401a plan.  I apologize for my ignorance, but we don't do a ton of these.  I think they can do this...but I would love some confirmation.  

Any guidance or alternative thoughts on this would be very much appreciated.

Thanks!

[Carol V. Calhoun]

If you're going to offer a match to 457(b) contributions, you want the match to go into a 401(a) plan.  That could be the existing one, but with a separate benefit structure for the part-time employees, or a new one.

The problem here is that the 402(g) limit ($23,500 in 2025, disregarding catch-ups) for 401(k) and 403(b) plans applies only to the employee's own contributions.  However, the comparable limit for 457(b) plans applies to the aggregate of employee and employer contributions.  So for example, if the employer is doing a 100% match and putting it all into the 457(b) plan, the employee could contribute a maximum of $11,750.  That would give rise to an employer match of $11,750, and the employer and employee contributions together would equal the $23,500 limit.

However, if the employer match goes to a 401(a) plan, the employee could contribute up to $23,500 to the 457(b) plan, because the contributions to the 401(a) plan would not count against the limit.

[Nic Pospiech]

Thank you, that was what I was wondering about...but couldn't exactly work out how to do.

 

Have a nice Holiday Season!