The 457 Answer Book is an in-depth resource that provides answers to the questions that tax-exempt organizations, state and local governments, their accountants, tax and legal advisors, 457 administrators, product providers, and investment counselors need to know. Guiding readers through all aspects of 457 plan administration -- from installation through the audit process -- the 457 Answer Book describes: the duties and responsibilities of those performing the functions; the required legal, accounting, and administrative tasks; checklists that facilitate control of each administrative process; and suggested forms.
The 457 Answer Book also provides:
- The history and legal origins of the plan
- Design and drafting standards
- Suggested administrative procedures
- Data processing and payroll considerations
- Operations and fund flow mechanics
- Marketing and sales suggestions
- And much more
457 Answer Book has been updated to include coverage of:
- A new chapter on Fiduciary Duties to a Governmental Deferred Compensation Plan that concerns duties to an eligible deferred compensation plan maintained by a state or local government employer
- A completely revised chapter on ineligible plans under Code Section 457(f), that discusses plans designed to provide benefits to executives of tax exempt and governmental organizations beyond the dollar limits applicable to eligible 457 plans, and includes analysis of nonqualified deferred compensation plans subject to tax under Section 457
- When an acquirer can refuse to accept responsibility for a tax exempt acquiree's 457(b) plan
- Changes made by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which permits governmental 457(b) plans to establish designated Roth accounts and permits governmental 457(b) plans, 401(k) and 403(b) plans to adopt in-plan Roth rollover provisions
- A checklist of administrative differences between a pre-tax deferral account and a designated Roth contribution account
- Reporting of direct in-plan Roth rollovers (IRRs) and distribution from designated Roth accounts on Form 1099-R
- Reporting of designated Roth contributions to a governmental 457(b) plan on Form W-2 How the RMD rules apply to designated Roth accounts
- Reporting of distributions of excess deferrals and designated Roth contributions from a governmental 457(b) plan
- When amounts in a governmental 457(b) plan's designated Roth account can be used for unforeseeable emergency distributions in a 457 plan
- The Supreme Court's decision that a fund adviser's fee need not be the lowest fee that would have resulted from arm's-length bargaining
- Whether amounts withheld from wages as contributions to 457 plans or amounts necessary to repay 457 plan loans are included in the definition of disposable income under the Bankruptcy Code
- The rules that apply to the deferral of compensation under a 457(f) plan and a discussion of the limitations to the amount of compensation that may be deferred under a 457(f) plan
- A discussion of when the HEART Act's requirement that a death benefit be paid when a participant dies while performing qualified military service apply to a 457 plan and when amendments to comply must be made to governmental 457(b) plans
- When the establishment of a group trust for a 457(b) plan is advantageous
- A discussion of how governmental pension plans are funded and what happens if the governmental unit does not properly fund its pension obligations
- 1. The History of 457 Plans
- Deferred Compensation Before Code Section 457
- Code Section 457 Enactment
- Extensions of Code Section 457 in the 1980s
- Changes in the 1990s: Code Section 457 Plans Start to Look More Like Retirement Plans
- EGTRRA and Beyond
- Job Creation and Worker Assistance Act and Pension Protection Act
- Final 457 Treasury Regulations
- 2. Eligible 457 Plans
- Employers Subject to Code Section 457
- Church and Church-Related Employers
- Rural Cooperatives
- Plans Subject to Code Section 457
- Eligible 457(b) Plans
- Inconsistent Administration
- Application of ERISA to 457 Plans
- Who Can Participate in a 457(b) Plan?
- Trust Requirements for Eligible Governmental Plans
- Compensation Limits for 457(b) Plans
- Agreements to Defer Compensation
- Contributions by Employers
- USERRA Applicability
- Limitations on Contributions
- Qualified Governmental Excess Benefit Arrangements
- Coordination of Deferrals with Other Plans or Other Employers
- IRS Approval
- Federal Tax Consequences to Participants
- Withholding and Reporting
- State Taxation of Nonresidents
- Excise Taxes
- Investment of 457 Plan Assets
- Life Insurance
- Distributions and Related Issues
- In-Service Withdrawals
- Retirement Distributions
- Separation from Service and Deferred Distributions
- Distributions to Independent Contractors
- Plan-Approved Domestic Relations Orders
- Transfers Between Plans
- Government Balance Sheet Reporting
- Advantages of a 457(b) Plan
- Negative Election Plans
- Governmental Plan Rollovers
- Tax and Service Credit for Governmental Plans
- Plan Termination
- References
- 3. Distribution Rules
- Overview of the Pension Protection Act of 2006 Distribution and Taxation Provisions
- Early Distribution Rule
- Minimum Distribution Rule
- Rollovers
- Direct Transfers
- Special Distribution Rules for Public Safety Employees and Officers
- PPA 06 Distribution Provisions Effective in 2008
- Other Distribution Rules
- 4. Investments
- Permitted Investments for Deferred Compensation Plans
- Types of Investments
- Rabbi Trusts
- Trusts for Governmental Deferred Compensation Plans
- Employer Responsibility for Plan Investments
- Participant-Directed Investment
- 5. Beneficiary Designations and Estate Planning
- Author's notes
- Making a Beneficiary Designation
- Using Trusts
- Family Rights That Restrain a Beneficiary Designation
- Charitable Gifts
- Simultaneous Death
- Absentees
- Marriage
- Spouse's Rights
- Premarital and Marital Agreements
- Disclaimers
- Government Claims
- Unclaimed Property
- Tax-Oriented Estate Planning
- Seeking Advice About Making a Beneficiary Designation
- 6. ERISA, Its Exemptions, and Other Nontax Considerations for 457 Plans
- ERISA in General
- Governmental Plans
- Church Plans
- Top-Hat Plans
- Excess Benefit Plans
- Severance and Welfare Plans
- Selected Securities and Insurance Law Issues for 457 Plans
- ERISA and Tax Consequences of Funded 457(f) Plans
- 7. Mergers and Acquisitions
- 457 Plan Considerations
- 403(b) Considerations
- Severance Pay and 403(b) Plans
- Section 415 Considerations
- 8. Defining a Top-Hat Plan in Connection with 457 Plans
- 457 Plans and ERISA
- Top-Hat Group
- Advisory Opinions and Case Law
- Other Definitional Issues
- Future DOL Guidance
- Applying the Rules
- Other Statutory Guidance
- 9. Creditors' Rights
- Shumate and ERISA Qualified Plans
- Shumate and 457 Plans Before the SBJPA
- Shumate and 457 Plans After the SBJPA
- Exemptions from the Bankruptcy Estate
- Judgment Creditors in Nonbankruptcy Situations
- Consequences of Availability of Benefits to Creditors
- Consequences of the Bankruptcy of the Plan Sponsor
- Judgment Creditors in Bankruptcy
- 10. Application of Federal Securities Law to 457 Plans
- Federal Securities Laws and 457 Plans Generally
- Eligible Public Employer 457 Plans Under Code Sections 457(b) and 457(e)(1)(A)
- Eligible Tax-Exempt Employer 457 Plans Under Code Sections 457(b) and 457(e)(1)(B)
- Noneligible 457 Plans Under Code Section 457(f)
- 11. Ineligible Plans Under 457(f)
- General Rules
- Distribution Requirements
- Income Tax Considerations
- Substantial Risk of Forfeiture
- Life Insurance Contracts
- Estate Tax Considerations
- Transfers and Rollovers
- Social Security and Medicare Taxes
- State Tax
- Participation in Other Plans
- Funding Requirements and ERISA Considerations
- ERISA Administration and Enforcement
- Federal Securities Law
- New Rules Under the American Jobs Creation Act of 2004
- 12. IRS Form Reporting and Related Issues
- General Information
- General 457 Reporting Rules
- ERISA Reporting Requirements
- FICA and FUTA Taxes
- IRS Form 940 - Employer's Annual FUTA Tax Return
- Reporting Distributions on Form 1099-R
- Rollover Distribution Notice
- Taxpayer Identification Numbers
- IRS Form W-2 - Wage and Tax Statement
- IRS Form W-3 - Transmittal of Wage and Tax Statements
- IRS Form W-4 - Employee's Withholding Allowance Certificate
- IRS Form W-4P - Withholding Certificate for Pension or Annuity Payments
- IRS Form 5329 - Additional Taxes Attributable to Qualified Retirement Plans (Including IRAs), Annuities, and Modified Endowment Contracts
- IRS Form 1040 - Individual Income Tax Return
- IRS Form 990 - Return of Organization Exempt from Income Tax
- IRS Form 990-T - Exempt Organization Business Income Tax Return
- 13. Domestic Relations Orders
- The Need for Domestic Relations Orders to Divide Section 457 Plans
- Elements of a Domestic Relations Order
- Elements of an Approved Domestic Relations Order
- Distribution to an Alternate Payee Before a Participant's Severance from Employment
- Death or Survivor Benefits
- Affect of a Participant Loan on Distribution to Alternate Payee
- Administration of Court Orders
- Tax Treatment - Eligible Section 457 Plans
- Tax Treatment - Ineligible Section 457 Plans
- 14. Miscellaneous Issues
- Agencies, Tribes, and International Organizations
- Independent Contractor Problems
- Failed 457(b) Plans; Restrictions on Investments of Eligible Plans
- Governmental Form Filings
- Matching Contributions
- Benefit Reductions
- Plan Choice Alternatives
- Leave Conversion Plan
- Rollovers
- USERRA
- 15. 457 EPCRS
- In General
- EPCRS Eligibility
- General Principles
- Cessation of Eligible Status
- 16. Administration of 457 Plans
- In General
- The Plan Administrator's Role
- Administrative Compliance
- Working with 457 Plan Limits
- Pension Protection Act of 2006 Changes Affecting Administration
- Recordkeeping Concerns
- Administering Communications
- APPENDIX A. Extracts from Relevant Code Sections
- APPENDIX B. Income Tax Regulations
- APPENDIX C. Model Rabbi Trust Provisions
- APPENDIX D. Ineligible Church Hospital Plan
- APPENDIX E. Model State Enabling Statute
- APPENDIX F. Specimen Top-Hat Statement
- APPENDIX G. Indexing of Employee Benefit Limits
Gary S. Lesser, Esq., is the principal of GSL Galactic Consulting, located in Indianapolis, Indiana. Mr. Lesser maintains a telephone-based consulting practice providing services to other professionals and business owners. He is a nationally known author, educator, and speaker on retirement plans for individuals and smaller businesses. Mr. Lesser has broad technical and practical knowledge of both qualified and nonqualified retirement plans. Mr. Lesser is the technical editor and co-author of HSA Answer Book, SIMPLE, SEP, and SARSEP Answer Book, Life Insurance Answer Book for Qualified Plans and Estate Planning, Roth IRA Answer Book and Quick Reference to IRAs, all published by Wolters Kluwer Law & Business. Mr. Lesser is also the principal author and technical editor of The CPA's Guide to Retirement Plans for Small Business Owners and the Advisor's Guide to Health Savings Accounts, publications of the American Institute of Certified Public Accountants (AICPA). He has developed several software programs that are used by financial planners, accountants, and other pension practitioners to design and market retirement plans for smaller businesses. His two software programs—QP-SEP Illustrator™ and SIMPLE IllustratorSM—are marketed and distributed nationally. He has also been published in the EP/EO Digest, Journal of Taxation of Employee Benefits, Journal of Compensation and Benefits, Journal of Pension Benefits, Life Insurance Selling, Rough Notes, and NAPFA Advisor. Mr. Lesser is an associated professional member of the American Society of Pension Professionals & Actuaries (ASPPA). In 1974, Mr. Lesser started his employee benefits career with the Internal Revenue Service as a Tax Law Specialist/Attorney in the Employee Plans/ Exempt Organizations (EP/EO) Division. He later managed and operated a pension administration and actuarial service organization, was an ERISA marketing attorney for a national brokerage firm, and was a senior vice president/ director of retirement plans for several nationally known families of mutual funds and variable annuity products. Mr. Lesser graduated from New York Law School and received his B.A. in accounting from Fairleigh Dickinson University. He is admitted to the bars of the state of New York and the United States Tax Court.
Mr. Lesser also co-authored Basic Accounting Simplified. This book helps students of accounting to think through, understand, and master the more difficult issues that will be taught as their accounting education progresses. For more information, visit www.basicaccountingsimplified.com
David W. Powell, Esq., is a partner in the law firm of the Groom Law Group, Chartered, Washington, D.C. Mr. Powell received his law degree from the University of Texas School of Law in 1982 and has practiced in the tax and employee benefits field in New Orleans, New York City, and Washington, D.C. He is a certified public accountant, and is a past president of the Washington Employee Benefits Forum. Mr. Powell works with tax and ERISA issues relating to all types of employee pension and welfare benefit plans, including qualified, nonqualified, 403(b), 457, church, governmental, health care, and flexible benefits plans. He is a member of the Employee Benefits Committee of the District of Columbia Bar and the Employee Benefits Committee of the Tax Section of the American Bar Association, and has authored a number of articles on employee benefits subjects. Recent publications include “Tax Aspects of Church Plans” and “Mergers and Acquisitions,”403(b) Answer Book (Aspen Publishers); “Pensions and Deferred Compensation for Financial Officers of Nonprofit Organizations,” Nonprofit Controllers Manual (Warren, Gorham & Lamont); “Design and Use of Section 457 Plans,” Journal of Deferred Compensation; “Tax Management Portfolio 372,” Church and Governmental Plans (BNA); and numerous others.
Peter Gulia, Esq., is the shareholder of Fiduciary Guidance Counsel, a Philadelphia law firm. After more than 21 years' experience, before 2006, with one of America's largest retirement-services businesses, Peter now counsels retirement plan sponsors, administrators, investment advisers, trustees, and other fiduciaries.
Since 1984, Peter has focused on the design, governance, fiduciary investment procedures, and administration of retirement plans; the design of investment-advice and investment-education programs; and lobbying on retirement-plans legislation and regulations. In addition to ERISA-governed plans, Peter has substantial experience with church plans and governmental plans, and with how laws beyond ERISA and the Internal Revenue Code affect retirement plans.
Although Peter concentrates his practice on retirement plans, other employee-benefit plans, and executive compensation, he continues to advise concerning an investment adviser's fiduciary duties and compliance procedures under the Federal Investment Advisers Act and other laws. Peter also advises trustees of charitable trusts, and advises lawyers and certified public accountants about their professional conduct.
In addition to works with other publishers, Peter is a contributing author of Aspen Publishers' 403(b) Answer Book, 457 Answer Book, Governmental Plans Answer Book, Roth IRA Answer Book, SIMPLE, SEP, and SARSEP Answer Book, and The Life Insurance Answer Book for Qualified Plans and Estate Planning.
Peter is a speaker for a broad range of continuing-professional-education programs including NAPFA, the National Association of Personal Financial Advisors, Pensions & Investments magazine, and Financial Research Associates. Peter is a member of the American Bar Association and the Philadelphia Bar Association, an Associated Professional Member of the American Society of Pension Professionals & Actuaries and its ASPPA Benefits Council of the Delaware Valley, and a member of the Philadelphia Compliance Roundtable.
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