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<< Older News  |  March 1, 2021


All News > 457 Plans

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A Look at the NQDC Market
PLANSPONSOR; free registration may be required Link to more items from this source
Feb. 24, 2021

"Data on number of plans, participants and liabilities by nonqualified plan type, and a listing of the largest providers of section 409A plans and section 457 plans."

Tags: 409A Plans  •  457 Plans  •  Nonqualified Plans

Illinois Teachers' Retirement System Announces New Supplemental Savings Plan
Franczek P.C. Link to more items from this source
Feb. 12, 2021

"TRS is requiring school districts to participate in the Plan, with Board action and return of the specified documents by no later than March 31, 2021.... [T]here may be some potential issues and complications with the Plan, especially for those districts which already offer, or might choose to offer, their own 457(b) plan."

Tags: 457 Plans  •  State and Local Government Plans

Plan Administrators, Plan Committees, and Public Agency 457(b) Plans
Best Best & Krieger LLP Link to more items from this source
Jan. 7, 2021

"Many investment advisors for public agency 457(b) plans believe that their public agency clients must have a retirement plan committee in order for the plan to have a proper plan administrator or fiduciary structure.... [T]here are a lot of good reasons: [1] not to establish a formal committee as the plan administrator; or [2] to limit the scope of a committee's responsibilities."

Tags: 457 Plans  •  Retirement Plan Administration  •  State and Local Government Plans

Public Agency 457(b) Plans Require Ongoing Attention and Maintenance
Best Best & Krieger LLP Link to more items from this source
Dec. 17, 2020

"Recordkeepers and third party administrators are not paid to be proactive and to look for potential problems.... Plan administrators need to be proactive in collecting, and having participants update, beneficiary designations.... When issues arise regarding the interpretation of the plan document, a proactive plan administrator will work toward having the problematic provisions of the plan amended or clarified so that the issue does not come up again.... If faced with a plan structure that lends itself to excess deferrals, a proactive plan administrator can and should proactively monitor deferrals during the year so the situation can be easily corrected in the current year -- not more awkwardly in the next tax year."

Tags: 457 Plans

Tax-Exempt Entity Retirement Plans and the Tax Consequences of Noncompliance (PDF)
Davis, Malm & D'Agostine P.C. Link to more items from this source
[Guidance Overview]
Nov. 3, 2020

"The [IRS] recently issued [FAQs about] the tax implications to participants and employers when a 457(b) plan becomes an ineligible plan and, as a result, is governed by Section 457(f). This latest IRS publication on 457(b) plans stems from the concern that there is an historical and ongoing pattern of noncompliance with respect to these programs and serves as a warning to employers that there are risks and costs associated with noncompliance."

Tags: 457 Plans

The Duties and Responsibilities of a 457(b) or 401(a) Plan Administrator
Best Best & Krieger LLP Link to more items from this source
Oct. 23, 2020

"[If] the provider is acting only in a 'ministerial' capacity, or is merely making recommendations (perhaps as a co-fiduciary) for the plan administrator's consideration, the ultimate responsibility and liability stays with the plan administrator. If you think your providers are taking responsibility for certain aspects of plan administration, it is critical to review your service agreements to confirm this."

Tags: 403(b) Plans and Annuities  •  457 Plans

Compliance Issues for 457(b) Plans Remain a Focus for IRS
Mercer Link to more items from this source
Oct. 14, 2020

"With the release of two new issue snapshots, IRS continues to focus on nonqualified deferred compensation plans under Internal Revenue Code Section 457. One snapshot explains the rules for correcting deferrals in excess of the annual limits for 457(b) plans, while the other explores some of the tax consequences to nongovernmental tax-exempt employers and their employees when a 457(b) plan becomes an ineligible 457(f) plan. Although snapshots typically don't provide new guidance, they often include tips that could prove useful in the event of an IRS audit."

Tags: 457 Plans  •  Retirement Plan Administration

Tax-Exempt Entity 457(b) Plans and the Tax Consequences of Noncompliance
Davis, Malm & D'Agostine P.C. Link to more items from this source
[Guidance Overview]
Oct. 9, 2020

"[C]ommonly reported plan compliance issues: ... [1] failure to limit eligibility to a select group of management or highly compensated employees ... [3] failure to limit the deferrals to the annual contribution maximums; [4] failure to report the employer contribution on behalf of a participant for payroll taxes; [5] failure to title the investment account in the name of the employer; [6] failure to recognize that a distribution from a 457(b) plan is a W-2 transaction; [7] failure to file a top hat compliance statement with the [DOL]; [8] failure to prevent loans to plan participants[.]"

Tags: 457 Plans

IRS Provides New 457(b) Resource Guides
Business of Benefits Link to more items from this source
Oct. 6, 2020

"The resource guide and correction of excesses guidance look to be a very useful tools. They not only link to the statute and each of the regs, they also link to the IRS Manual sections on 457(b) plans. They do have their limitations (such as providing no guidance on how one corrects failures in a tax-exempt's 457(b) plan), but it should be a permanent part of the practitioner's research tool list."

Tags: 457 Plans

So This Is 457 Heaven
403bwise Link to more items from this source
Oct. 6, 2020

"Teachers have long enjoyed the ability to contribute to both the 403(b) and the 457(b).... In K-12 circles the 403(b) is more widely available, and maybe more widely understood. That's a big maybe given the total lack of objective retirement plan information provided to school employees. Nevertheless, there is a strong case to be made that the 457(b) is superior to the 403(b)."

Tags: 457 Plans  •  Retirement Plan Design

Editor's Pick IRS Issue Snapshot: 457(b) Plan of Tax Exempt Entity -- Tax Consequences of Noncompliance
Internal Revenue Service [IRS] Link to more items from this source
[Guidance Overview]
Sept. 28, 2020

"Issue Indicators or Audit Tips: [1] [T]he Service generally will accept on a provisional basis ... submissions relating to 457(b) plans outside of EPCRS but using standards that are similar to those that apply with respect to Voluntary Correction Program filings under sections 10 and 11 of the revenue procedure.... [2] The plan document may state when amounts deferred become vested. Many 457(b) plans are silent on vesting because deferrals are fully vested when made. [3] A tax exempt employer that maintains a 457 plan files a W-2 rather than a Form 1099-R."

Tags: 457 Plans

Editor's Pick IRS Issue Snapshot: 457(b) Plans -- Correction of Excess Deferrals
Internal Revenue Service [IRS] Link to more items from this source
[Guidance Overview]
Sept. 25, 2020

"Issue Indicators or Audit Tips: [1] Review W-2, Box 12 to determine if deferrals exceed the IRC Section 457(b) dollar limit in effect for the year. Verify if these excess amounts were due to allowable catch-up contributions.... [2] Request documentation to verify timely distribution of excess deferrals. [3] Review Forms W-2 and 1099-R for proper reporting of distributions."

Tags: 457 Plans

SEC Cracks Down on 403(b) and 457(b) Advisers' Undisclosed Compensation and Conflicts
Proskauer Link to more items from this source
Aug. 13, 2020

"As part of the negotiated settlement, VFA agreed to an undertaking capping its management fees at 45 basis points for all Florida K-12 teachers who currently participate (and, in some cases, those who prospectively participate) in its advisory product in Florida's 403(b) and 457(b) retirement programs. The cap will remain in effect for the duration of the clients' enrollment in the programs.... As it has in recent enforcement initiatives, the SEC put market participants on notice that it would be looking closely at the administration of 403(b) and 457(b) plans whose beneficiaries are 'main street investors,' despite that they are administered, in many cases, by large government agencies."

Tags: 403(b) Plans and Annuities  •  457 Plans  •  Retirement Plan Investments

Using a Plan Administration Expense Account as Part of a Governmental Agency's 457(b) or 401(a) Plan
Best Best & Krieger LLP Link to more items from this source
Aug. 12, 2020

"Reimbursements of plan expenses already paid by the employer need to be carefully documented and must be made soon after they have been paid -- paid years ago can't be reimbursed. Amounts that are held in a separate account (unallocated) from participant accounts must be properly utilized or reallocated back to participant accounts by plan year-end. Even though the category of expense (e.g., plan audit fees) may be clearly administrative, the amount of the payment or reimbursement must be reasonable and appropriate to the services provided. Like any other fiduciary decision, procedural prudence dictates that each payment and reimbursement be carefully considered, by the right persons, and properly documented."

Tags: 401(k) Plans  •  457 Plans  •  Retirement Plan Administration

Back-to-School Retirement Savings Checklist for Teachers
403bwise Link to more items from this source
Aug. 7, 2020

"[1] Do you have a pension? If yes, learn the basics of how it works.... [2] Do you have a 403(b) available at work? If yes, do you understand how it works? ... [3] Do you have quality 403(b) vendor(s) available? ... [4] Do you have a 457(b) available at work? Do you understand how it works? ... [5] Do you have quality 457(b) vendor(s) available? ... [6] Do you contribute to Social Security?"

Tags: 403(b) Plans and Annuities  •  457 Plans  •  Health Plan Design

Congress Should Give Americans Flexibility to Keep Retirement Savings on Track
Investment Company Institute [ICI] Link to more items from this source
Aug. 3, 2020

"Congress can help American families get their retirement savings goals back on track by including the 'Temporary Coronavirus-Related Catch-Up Contribution' proposal in the next COVID-19 relief package. The proposal would allow workers who were adversely affected by COVID-19 to make additional contributions of up to $6,000 annually -- for three years beginning in 2021 -- to their retirement accounts ... The proposal would be available to qualified workers regardless of age, and would permit employers to match their employees' catch-up contributions."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  457 Plans  •  Coronavirus (COVID-19)  •  IRAs  •  Retirement Plan Design

SEC Chairman Jay Clayton Describes SEC's Ongoing Efforts to Protect Teachers' Retirement Savings
U.S. Securities and Exchange Commission [SEC] Link to more items from this source
[Official Guidance]
July 28, 2020

"[The] Teachers Initiative ... is an important aspect of [the SEC's] efforts to focus enforcement and investor education resources where they are needed and will have the greatest impact -- we have at least 800,000 teachers who participate in defined contribution plans with a total of over $1 trillion in assets ... That is a pool of assets that should be managed with due care and candor.... [T]he amounts at stake are high and our teachers deserve our attention. It is clear that we and our fellow authorities -- federal, state and local -- should be watching this space."

Tags: 403(b) Plans and Annuities  •  457 Plans

SEC Charges VALIC Financial Advisors with Failing to Disclose Payments to Promote Services to Florida Educators
U.S. Securities and Exchange Commission [SEC] Link to more items from this source
[Official Guidance]
July 28, 2020

"The [SEC] today charged Houston-based VALIC Financial Advisors Inc. (VFA) in a pair of actions for failing to disclose to teachers and other investors practices that generated millions of dollars in fees and other financial benefits for VFA. In the first action, the SEC found that VFA failed to disclose that its parent company paid a for-profit entity owned by Florida K-12 teachers' unions to promote VFA and its parent company services to teachers. In the second action, the SEC found that VFA failed to disclose conflicts of interest regarding its receipt of millions of dollars of financial benefits that directly resulted from advisory client mutual fund investments that were generally more expensive for clients than other mutual fund investment options available to clients. VFA agreed to pay approximately $40 million to settle the charges in these two actions."

Tags: 403(b) Plans and Annuities  •  457 Plans  •  Retirement Plan Investment Costs

Problems with Co-Provider 457(b) Plan Arrangements
Best Best & Krieger LLP Link to more items from this source
July 10, 2020

"[A] 'co-provider' arrangement ... [has] a single governmental 457(b) plan that is evidenced by a single plan document, with more than one plan recordkeeper and at least one plan investment consultant.... The chances of compliance violations (i.e., excessive deferrals, hardships, loans, etc.) were dramatically increased by having two recordkeepers not communicating with one another.... Neither of the recordkeepers were in a position to track all of the plan-level, participant-level limits and restrictions."

Tags: 457 Plans  •  Retirement Plan Administration

GASB Issues Guidance on Certain Component Unit Criteria and Section 457 Deferred Compensation Plans
Governmental Accounting Standards Board [GASB] Link to more items from this source
[Guidance Overview]
June 23, 2020

"Prior standards presumed that all Section 457 plans were not pension plans and, therefore, were not subject to pension plan reporting requirements; similarly, benefits provided through Section 457 plans were not reported as pension benefits. Under Statement 97, however, Section 457 plans should be classified as either a pension plan or other employee benefit plan, depending on whether the plan meets the definition of a pension plan. It also clarifies that Statement 84, as amended, should be applied to all arrangements organized under IRC Section 457 to determine whether those arrangements should be reported as fiduciary activities."

Tags: 457 Plans  •  Accounting  •  State and Local Government Plans

Editor's Pick IRS Issue Snapshot: Catch-Up Contributions Under Section 457(b) Plan of Governmental and Tax-Exempt Employers
Internal Revenue Service [IRS] Link to more items from this source
[Guidance Overview]
June 5, 2020

"This issue snapshot discusses catch-up contributions under an IRC Section 457(b) plan.... Annual deferrals participants make to an IRC Section 457(b) plan are limited by the basic annual limitation unless a catch-up provision applies, in which case they're higher. IRC Section 457(b) plans may permit special 457 catch-up contributions during the last three taxable years before a participant's normal retirement age. Governmental IRC Section 457(b) plans may also permit age 50 catch-up contributions."

Tags: 457 Plans

IRS May Be Increasing Focus on Catch-Up Contributions in 403(b) and 457(b) Plans
Groom Law Group Link to more items from this source
May 21, 2020

"Recent announcements from the IRS indicate the potential for increased audits of section 403(b) and 457(b) plans, specifically relating to catch-up contributions under such plans. The IRS recently published an issue snapshot discussing the rules for catch-up contributions under 403(b) plans and released Publication 5313, containing the Fiscal Year 2020 Program Letter for the Tax Exempt & Government Entities division, which provides for a focus on such contributions."

Tags: 403(b) Plans and Annuities  •  457 Plans

Impact of CARES on Volunteer First Responder 457(e)(11) LOSAP Plans
Business of Benefits Link to more items from this source
Apr. 23, 2020

"[A Length of Service Awards program (LOSAP) acts] as a sort of gratuitous payment arrangement which local fire districts adopt under either state or local laws the deferral of a payment of up to $6,000 per year for volunteers providing fire fighting and prevention services, emergency medical services, and ambulance services.... The CARES Act does not allow the tax on LOSAP distributions to be spread over three years, like it does for the tax on distributions from other kinds of retirement plans. There is also no ability for the firefighter to repay the amount of those distributions back to the plan, as the CARES Act allows to be done for other types of retirement plans."

Tags: 457 Plans  •  CARES Act  •  Coronavirus (COVID-19)

CARES Act Establishes Rules for Coronavirus-Related Distributions from 457(b) Plans
Best Best & Krieger Link to more items from this source
[Guidance Overview]
Apr. 10, 2020

"Existing rules allowing public employers to grant public employees with access to their 457(b) accounts for unforeseeable emergency distributions still remain in place. However, under the CARES Act, workers impacted by coronavirus will be able to take advantage of more favorable rules for distributions if their employer allows it."

Tags: 457 Plans  •  CARES Act  •  Coronavirus (COVID-19)

Answering Questions About COVID-19 and Your Non-Governmental 457(b) Plans (PDF)
Fulcrum Partners LLC Link to more items from this source
Apr. 6, 2020

"As a participant in a non-governmental 457(b) plan, can I cancel, reduce, or change my deferral election? ... Can I take a distribution from my plan due to COVID-19?  ... As a plan sponsor, can I reduce or remove the match or other employer contributions?  ... How do I handle employees on leave?"

Tags: 457 Plans  •  Coronavirus (COVID-19)

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