Do I have a government 457B?

[Kybarney]

My wife just signed up for a 457B through her employer which is a hospital. I am trying to find in writing that's it is a government 457B instead of the non-government variety. I only want to contribute to a government one due to the creditor risk of non-government plans. A senior person emailed me and said the hospital 457B is considered a government plan. They said:

The 457b plan is considered a governmental 457b plan because of <hospital name removed> close relationship to the University of <name removed>.

That person also said the funds are held in trust at Fidelity:
The 457b assets are held in trust at Fidelity and would not be open to <hospital name removed>/ creditors in the case of lawsuit or bankruptcy. Those are employee dollars.

This is what the 457B Summary plan description states on holding the assets in trust:
Question: Who serves as Custodian/Trustee for the Plan’s assets?
Answer: A Trust Agreement between the Plan Sponsor and the Trustee and a Custodial Account Agreement between the Plan Sponsor and the Custodian have been established to hold the Plan assets.

Custody of assets per the plan:
Who has custody of the retirement plan assets? The retirement plan assets are held by the trustee or custodian for the benefit of Plan Participants.

Are you comfortable this is a government plan protected from creditors, or do I need to keep researching? Trying to do my due diligence before we start maxing it out this year. Would you use this plan?

Thanks for any feedback.

[CyclingDuo]

Governmental employers, such as state governments, state schools or state hospitals are eligible to offer 457(b) plans to their employees.

Hospital with state university? Sounds legit. So our guess is yes.

Why not call the HR at the hospital - or the plan provider - to get 100% confirmation?

[blueman457]

I would check with HR and Fidelity and the plan itself. I lot of major state university partner with hospitals, but don’t OWN the hospital. Ex: I work for the medical school of state university which partners with the hospital. I have access to a govt 457 but my nurses who are employed by the hospital do not.

[Kybarney]

Blueman,

When you say check with the plan itself, wouldn't that be checking the "summary plan description?" If so, I've already looked through it, but nothing jumped out..

Thanks,
Kybarney

[Kybarney]

I edited the original post to add more info. Adding the edited piece here as well.

Custody of assets per the plan:
Who has custody of the retirement plan assets? The retirement plan assets are held by the trustee or custodian for the benefit of Plan Participants.

[BL]

One quick check may be to see if it can be rolled over to an IRA when you leave the company. AFAIK, only government plans can do that.

[student]

One quick check may be to see if it can be rolled over to an IRA when you leave the company. AFAIK, only government plans can do that.

+1. I was going to suggest that as this is my understanding as well.

[Kybarney]

I called Fidelity and they said if it was non-governmental plan it would say “non-qualified” in the plan documents, which it did not. He wouldn’t share the plan documents with me. With that, he said it’s a government plan. Would you take Fidelity at face value?

[CyclingDuo]

I called Fidelity and they said if it was non-governmental plan it would say “non-qualified” in the plan documents, which it did not. He wouldn’t share the plan documents with me. With that, he said it’s a government plan. Would you take Fidelity at face value?

Understand your dose of skepticism, but seriously - call HR at the hospital and talk to them about it. I'm sure they have answered the question before.

[Oicuryy]

Some info on non-government 457 plans is here.
https://www.irs.gov/retirement-plans/no ... tion-plans

Is your wife one of a small group of managers and highly paid employees? Is the plan open to most or all hospital employees?

Ron

[Kybarney]

Oicuryy,

She’s a highly compensated employee. CRNA (Certified Registered Nurse Anesthetist) job title. HR referred me to the CFO who told me it was a government plan. Do I take that at face value or try to find it in writing in the plan doucuments (if I can find someone that has them) before we contribute $18,500/year into it?

[blueman457]

It sounds like you've done a lot of your homework... if the CFO says it's a government plan, it probably is a gov't plan. But....

One quick check may be to see if it can be rolled over to an IRA when you leave the company. AFAIK, only government plans can do that.

+1. I was going to suggest that as this is my understanding as well.

+1 Confirm your distribution options.

[CyclingDuo]

Oicuryy,

She’s a highly compensated employee. CRNA (Certified Registered Nurse Anesthetist) job title. HR referred me to the CFO who told me it was a government plan. Do I take that at face value or try to find it in writing in the plan doucuments (if I can find someone that has them) before we contribute $18,500/year into it?

https://www.irs.gov/retirement-plans/co ... 457b-plans

If it has the ability to designate a portion or all of the salary reduction as a Roth 457b option, it is governmental. If it allows loans for the participant, it is governmental. If it allows rollovers to other eligible retirement plans (401(k), 403(b), governmental 457(b), IRAs) - it is governmental.

If the answer is no to any of these, it is not a governmental 457b.

[ofckrupke]

If it has the ability to designate a portion or all of the salary reduction as a Roth 457b option, it is governmental. If it allows loans for the participant, it is governmental. If it allows rollovers to other eligible retirement plans (401(k), 403(b), governmental 457(b), IRAs) - it is governmental.

If the answer is no to any of these, it is not a governmental 457b.

Actually: if the answer to the rollover issue is no, then it is not a governmental 457b plan.

But it is not a requirement for a governmental plan to offer a Roth sleeve or a loan program...these are just options for the sponsor to include or not as they see fit...but since not even options for non-governmental plans, all three sentences of the first paragraph above are true.

[Kybarney]

I called Fidelity again and they were sure it’s a government plan according to their system. He said it can be rolled into an IRA upon employment separation. It doesn’t allow ROTH contributions though. That is only allowed in her 403B. I too thought to be a government plan, ROTH has to be allowed. Is that not the case?

[CyclingDuo]

If it has the ability to designate a portion or all of the salary reduction as a Roth 457b option, it is governmental. If it allows loans for the participant, it is governmental. If it allows rollovers to other eligible retirement plans (401(k), 403(b), governmental 457(b), IRAs) - it is governmental.

If the answer is no to any of these, it is not a governmental 457b.

Actually: if the answer to the rollover issue is no, then it is not a governmental 457b plan.

But it is not a requirement for a governmental plan to offer a Roth sleeve or a loan program...these are just options for the sponsor to include or not as they see fit...but since not even options for non-governmental plans, all three sentences of the first paragraph above are true.

I was just going by the IRS page. Correct, that not every plan has to allow the Roth or the loans, but I thought neither of those options were available in a non-governmental 457b. Meaning, if they were allowed in the OP's plan, it confirmed that the 457 was a governmental one. Has that changed in the past (perhaps the 2010 changes) where those options are now offered in non-governmental 457's?

Looks like age 50+ catch up contributions are not allowed in the non-governmental 457 plans:

https://www.irs.gov/retirement-plans/no ... tion-plans

That could be another answer to whether or not if the OP's 457 is governmental or not.

[ofckrupke]

I too thought to be a government plan, ROTH has to be allowed. Is that not the case?

That is not the case. From an IRS 457 information page:

Can a 457(b) plan include designated Roth accounts?

Yes, a governmental 457(b) plan may be amended to allow designated Roth contributions and in-plan rollovers to designated Roth accounts.

Note the use of the word "may" (in the citation, I added the emphasis).

[Oicuryy]

Have you found out if the plan is open to rank and file hospital employees? If it is, it is a government plan.

Non government 457 plans must file a Top Hat Plan Statement with the Department of Labor. You could check with the DOL's Public Disclosure Room to see if the hospital has filed one.
https://www.dol.gov/agencies/ebsa/about ... s-from-dol

Ron

[Katietsu]

To OP: Many of us are very careful to cross every t and dot all i’s. But since you have done more than your due diligence and are still skeptical, what is giving you cause for concern. Governmental vs non governmental 457 plans are very different beasts and it is unlikely that anyone would confuse them let alone multiple knowledgeable people. Everything seems consistent. (Governmental plans can offer 457’s but do not need to.) Is there something that you have not told us that is bothering you?

[student]

If it has the ability to designate a portion or all of the salary reduction as a Roth 457b option, it is governmental. If it allows loans for the participant, it is governmental. If it allows rollovers to other eligible retirement plans (401(k), 403(b), governmental 457(b), IRAs) - it is governmental.

If the answer is no to any of these, it is not a governmental 457b.

Actually: if the answer to the rollover issue is no, then it is not a governmental 457b plan.

But it is not a requirement for a governmental plan to offer a Roth sleeve or a loan program...these are just options for the sponsor to include or not as they see fit...but since not even options for non-governmental plans, all three sentences of the first paragraph above are true.

I was just going by the IRS page. Correct, that not every plan has to allow the Roth or the loans, but I thought neither of those options were available in a non-governmental 457b. Meaning, if they were allowed in the OP's plan, it confirmed that the 457 was a governmental one. Has that changed in the past (perhaps the 2010 changes) where those options are now offered in non-governmental 457's?

This is correct. ofckrupke was pointing out that the following statement

If the answer is no to any of these, it is not a governmental 457b.

is not correct.

[Kybarney]

Katietsu,

I am good. I just wanted to see it in writing and not take someone's word for it through an email or a call center agent. I didn't want to start putting $18,500/year into a sizable retirement asset only to find out years from now it's at risk for creditors or something silly due to non-govermental status. I guess I've done enough "word of mouth" deals with home improvements, etc., to want to do more due diligence with this.

Other than asking people (HR, Fidelity, etc) I didn't know how to find the plan documents which show these details as nobody has them. I know I'm being overly cautious though. With that said, I am good with everything.

Thanks everyone for your replies, really appreciate it.

[BL]

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Looks like age 50+ catch up contributions are not allowed in the non-governmental 457 plans:

https://www.irs.gov/retirement-plans/no ... tion-plans

That could be another answer to whether or not if the OP's 457 is governmental or not.

I see that the 3-year-before-retirement catchup is allowed in both types. If you are nearing retirement and missed filling the 457 each year, you have a limited chance to add some back. If the 457 wasn't available every year you worked there, this could be useful (It was for me long ago.)