There is a broad array of plans from which an employer and plan sponsor can choose. In a 2021 NTSA Summit workshop session, an industry expert offered an overview, with a special focus on 430(b) and 457 plans.
Nathan Glassey, Vice President, National Benefit Services, set the table by looking at which employers can offer particular kinds of plans.
Plan | Offered by |
401(k) | All non-government employers (and some grandfathered government employers) |
401(a) and (m) | State and local governments and 501(c) tax-exempt organizations |
403(b) | Public education employers and 501(c)(3) organizations |
457(b) governmental | State and local governments |
457(b) Non-governmental | Any 501(c) tax-exempt organization |
457(f) | State and local governments and 501(c) tax-exempt organizations |
Plan Features
Glassey also took a look at some features those plans can offer:
Plan | Plan Document | Plan Loans | Distributions | Plan Terminations |
401(k) | Yes | Yes | Death, disability, at age 59½, termination | Yes |
401(a) and (m) | Yes | Yes | Death, disability, at age 59½, termination | Yes |
403(b) | Yes | Yes | Death, disability, at age 59½, termination | Yes |
457(b) governmental | Yes | Yes | Death, disability, at age 59½, termination | Yes |
457(b) non-governmental | Yes | No | Death, disability, at age 59½, termination | Yes |
457(f) | Yes and with employment contract | No | Taxable when no substantial risk of forfeiture | No |
Glassey highlighted the plan document requirement, noting that it now is required, including 403(b)s and 457(b)s. “The plan needs to follow the document. Otherwise they could run into problems,” he warned. Glassey added that 457(f) plans also “rely heavily” on employment contracts.
And Glassey said that while almost all plans cited allow terminations, “it’s not an easy feat” to terminate a plan, and it entails completing a series of steps.
Combining Benefits
Glassey noted that it is possible to combine different kinds of benefits from different kinds of plans. Doing so provides the best savings opportunities for plan sponsors and participants, and also can be a tool for employee retention, he said.
Glassey observed that 457(f) plans differ from others, since they are funded not by employee deferrals, but by employer contributions. It’s important to write the type of distributions that can be made from a 457(f) into a contract, he said, adding that that can affect tax treatment.
Keep Employers Informed
“Many employers don’t know the options available to them,” said Glassey. “It’s up to us to know the information and have the best tools available to help them.”
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