Governmental 457(b) Plan Eligibility

A governmental 457(b) plan excludes from participation employees regularly scheduled to work fewer than 36 hours per week.  The plan also provides that an employee will enter the plan on the first day of the calendar quarter next following the later of the employee's (i) completion of 6 months of service during which the employee is regularly scheduled to work at least 36 hours per week, or (ii) attainment of age 21.

Anyone see a problem with these eligibility and entry date provisions?

Also, must a governmental 457(b) plan allow long-term part-time employees to make elective deferrals?

How, if at all, might state law (specifically, Colorado's) affect the answer to these questions? 

If the employer affiliates with the Colorado Public Employees’ Retirement Association’s PERAPlus § 457(b) plan, PERA has set the plan’s provisions.

If State law grants the employer a power to establish and maintain a distinct plan, the employer must follow the restrictions of the Colorado statutes that so enable the employer and Colorado laws that burden the employer.

Consider that Colorado law differs based on the exact local, county, municipal, special-district, or other government, or its agency or instrumentality.

A State or local government employer’s § 457(b) plan typically sets no eligibility conditions beyond being an employee.

Typically, entry is the next pay date after the employer has processed the employee’s wage-reduction agreement.

If State law authorizes and the employer provides a nonelective or matching deferral, those eligibility and entry provisions might differ from those for wage-reduction deferrals.

Whether a governmental § 457(b) plan must allow long-term-part-time employees to make elective deferrals turns on State law.

Even if State law does not preclude an exclusion of part-time employees, many governmental employers find little reason to set an exclusion for wage-reduction deferrals that do not affect the employer’s budget.

This is not advice to anyone.