Governmental_and_non-governmental_plans 457_plan

1 governmental , non-governmental plans

1.1 non-governmental plans

1.1.1 457(b) (eligible) plans
1.1.2 457(f) (ineligible) plans

governmental , non-governmental plans

there 2 primary types of plans, governmental , non-governmental. governmental plans under 457(g) plans may no longer created. governmental , non-governmental plans 457(b) plans.

non-governmental plans

non-governmental 457 plans have number of restrictions governmental ones not. money deferred non-governmental 457 plans may not rolled other type of tax-deferred retirement plan. may rolled non-governmental 457 plan. also, money deferred non-governmental plans not set aside in trust exclusive benefit of employee making deferral. internal revenue code requires money in non-governmental 457 plan remains property of employer , not taxable until time of distribution specific situations allowed original 457 plan or in cases of withdrawals emergency cash needed situations. if funds set aside or provided in separate account employee or in employee s name type of 457 plan not tax-deferred plan , becomes non-governmental 457(b) funded pre-tax plan.

457(b) (eligible) plans

employee retirement income security act (erisa) legislation has said non-governmental plans must limited group of higher compensation employees. level of compensation required not specified erisa, must according ascertainable standard employer sets. same highly compensated limit ($115,000 year preceding year of 2014 , $120,000 preceding year of 2015) in place 401(k) discrimination testing acceptable, restricting plan class of employees such directors or officers. because of limitation higher-compensation employees, 457(b) plans referred top hat plans.

457(f) (ineligible) plans

irs code section 457(f) allows non-governmental, non-profit organizations set plan can tax deferred , exceed normal defined contribution employee deferral limit. ineligible 457 plans made available because non-profit organizations not allowed have kind of non-qualified deferred compensation plan.

generally, these deferred amounts taxable under section 83 of code, unless employee faces substantial risk of forfeiture has been clarified irs mean in addition money remaining available general creditors of organization or subject not vesting if employee not stay employer full vesting period. when risk of forfeiture gone, value of property given employee ceases deferred taxation , included in current ordinary gross income.

another plan design, rabbi trust, gives employee deferred money in trust , funded, must available creditors. make employer junior general creditors employee can avoid current inclusion income.

these general deferral of current income conditions of section 83 (as explained in revenue ruling 60-31) give 457(f) plan deferral of tax desired.

in 2004 congress passed tax act added section 409a tax code , applies deferred nonqualified compensation covers 457(f) plans. in response executive bonus plans given key employees @ enron allowed them access deferred compensation if financial conditions of employer deteriorated (i.e., if enron got trouble).