457 Top Hat Plans: Tips and Traps

“We’re in a day in which a lot of employers are looking to layer on benefits,” says PenServ Plan Services President and NTSA Immediate Past President Sue Diehl, and now non-profit employers are looking to set up 457(b) plans like their governmental counterparts. Diehl made her remarks in the latest NTSA Podcast, “457 Top Hat Plans: Tips and Traps.”

In the podcast, Linda Segal Blinn, head of technical services for Voya Financial and a member of NTSA’s Communication Committee, talks with Diehl about a wide range of operational, plan design and compliance issues associated with 457 top hat plans for non-profit employers.

One of the most critical things to remember, says Diehl, is to “keep in mind that in a 457(b) top hat plan, the employer also must do a top hat filing with the DOL.” And just how critical is that? Diehl points out that it is necessary in order for a non-profit top hat to obtain relief from having to:

• file the Form 5500;

• prepare a summary plan description; and

• prepare a summary annual report.

A plan has 120 days after its establishment to do a top hat filing. But the good news is that it only has to be done once.

Diehl says for non-profit 457(b) top hat plans should understand that with their plans, there are no:

• Roth deferrals;

• rollovers;

• transfers to a state defined benefit plan; or

• age 50 catch-up deferrals.

She further says that they should understand:

• more about the special three-year catch up;

• the importance of selecting the correct top hat plan to establish; and

• the reporting rules.

“It’s not as flexible as the governmental plan, but it definitely has a place in the world of plans,” says Diehl of the 457(b) top hat plan.

NTSA Net podcasts feature the latest industry intel in an easy-to-digest audio format. You may either stream them or download them to a personal device.

Other podcasts include:

• Candid Culture: How to Take (and Give) Constructive Feedback — Every interaction we have with somebody trains them what to do with us the next time. That’s part of the core of the message Shari Harley, founder and President of Candid Culture.

• Robo-Advisors: Threats and Opportunities — NTSA President Kent Schutte discusses the challenges that robo-advisors pose to 403(b) advisors, along with the ways that their growth can actually help plan professionals grow their businesses.

• Making Yourself Accessible to Your Clients — Ellie Lowder and Jill Snyder discuss the ways advisors can make themselves more accessible to plan sponsors and their employees.

• Social Media Best Practices for Advisors — Mike Webb of Cammack Retirement Group talks with Jon Hall of PlanMember Services about the best ways for advisors to leverage the growing popularity of social media to enhance their businesses.

• What Does the DOL Fiduciary Regulation Mean to You? — with NTSA Executive Director Chris DeGrassi.