(b)lines Ask the Experts – When There Are Limits on Participation in 457(b)s

“I thought that participation in 457(b) plans was limited to select management and highly compensated employees? Am I missing something?”

Stacey Bradford, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:

This is an excellent question, as the 457(b) plan rules can vary greatly depending on the type of entity sponsoring the plan, so confusion abounds in this area. You are correct that private tax-exempt 457(b) plans MUST limit participation to select management or highly compensated employees.

However, one of the many differences between 457(b) plans sponsored by governmental entities (such as your current employer) and private tax-exempts is that governmental 457(b) plan sponsors may decide who is eligible to participate at their discretion, and may allow all employees to participate if they so choose. In your particular plan, it appears that your public university employer has elected to allow all employees to participate.

For a nice summary of the differences between 457(b) plans sponsored by private tax-exempts and those sponsored by governmental plans, check our prior Ask the Experts column about the subject. Note we have also addressed the applicability of 457(b)s to churches in another prior column, so with this current Q&A you have a handy all-in-one-place location to access this information!

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.