Basic Rules for a 457(b) Top Hat Plan

Q. What are the basic rules for a 457(b) top hat plan?

A. The basic rules are: 

• Unlike a governmental 457(b) plan, there is no age 50+ catch up contribution; assets are not permitted to be set aside to protect them from the employer’s general creditors; and no rollovers are permitted in or out of the plan.
• The limits, therefore, are the basic 457(b) plan limits set annually by the IRS, plus potential additional amounts for any underutilized limits if the final 3-year catch-up is included in the plan.
• Only key management employees can be included—no rank and file employees are permitted in the plan.
• A plan document must be used, and a one-time filing with the DOL to gain the ERISA exemption must be made within 120 days of the adoption of the plan. A sample letter should be available for use from the product provider supporting the plan.