457 Employer Contributions

Under Federal Regs, I understand a governmental entity can make employer contributions to a 457(b) plan.  What I am unclear on is if the State of PA allows for this?  Anyone work on PA governmental where employer match or nonelective is permitted.  I realize Er and Ee would be subject to 402(g) limitation.  I've gotten various responses from attorneys.

Some lawyers have interpreted Pennsylvania’s Fiscal Code § 8.2 [72 Pa. Stat. § 4521.2] as the Commonwealth not providing a nonelective or matching contribution for a Commonwealth officer or employe, but not—by the enabling statute’s two sections [cited below] alone—precluding a political subdivision from providing a nonelective or matching contribution. See 72 Pa. Stat. § 4521.2(g) (including “nor shall the Commonwealth contribute to its deferred compensation program”).

Here’s Pennsylvania’s enabling statute for governmental § 457(b) plans:

72 P.S. § 4521.1 https://govt.westlaw.com/pac/Document/NEEF65700343A11DA8A989F4EECDB8638?viewType=FullText&listSource=Search&originationContext=Search+Result&transitionType=SearchItem&contextData=(sc.Search)&navigationPath=Search%2fv1%2fresults%2fnavigation%2fi0ad7140b0000018c68930141e98d975f%3fppcid%3d6daf38e7a9864d17b11a10c8d1bc3a74%26Nav%3dSTATUTE_PUBLICVIEW%26fragmentIdentifier%3dNEEF65700343A11DA8A989F4EECDB8638%26startIndex%3d1%26transitionType%3dSearchItem%26contextData%3d%2528sc.Default%2529%26originationContext%3dSearch%2520Result&list=STATUTE_PUBLICVIEW&rank=1&t_querytext=deferred+compensation&t_Method=WIN

72 P.S. § 4521.2 https://govt.westlaw.com/pac/Document/NF25AB7B0343A11DA8A989F4EECDB8638?viewType=FullText&originationContext=documenttoc&transitionType=CategoryPageItem&contextData=(sc.Default)&bhcp=1.

These are current through 2023 Regular Session Act 32.

The hyperlinks above are to an unannotated (and unofficial) version of Pennsylvania Statutes. A researcher should read an authoritative text, read the annotations, and use a citator tool to look for court decisions and attorney general opinions that interpret the statute.

(It has been many years since I last looked at the law on a question of this kind.)

Consider that other Pennsylvania or municipal law might preclude, restrict, or constrain a political subdivision’s employer-provided contribution.

Likewise, consider that a response to your query might vary with the identity of the particular political subdivision, its funding sources, its supervision from Commonwealth agencies and instrumentalities, its ordinances and other local law, its bargaining with labor association, and other facts and circumstances.

Internal Revenue Code § 457(b)’s deferral limit applies to the sum of a year’s deferrals, including elective, matching, and nonelective deferrals.

Nothing here is legal advice.

Inasmuch as the role of a TPA goes then, and encountering existing clients or prospects looking to implement this design, it sounds as if the answer to the client would be to consult with legal counsel?  Do you agree?

Yes. While TPAs do a great job explaining Federal tax law, complexity about what powers a local government has or lacks calls for a lawyer’s advice.