A 457(b) Plan Distribution Depends on Which 457(b) Plan You’re In

By Jeff Chang

With very few exceptions, the rules governing governmental 457(b) plans require a “severance of employment” to occur before a distribution can be made. Recently, we came across yet another of those arcane, little-known rules that will likely trip-up hundreds of California workers who have terminated their current employment and now want to take a distribution from the 457(b) plan they participate in.

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The Improper Use of Governmental “Pre-Approved” Plans

By Jeff Chang

There continues to be new, complicated problems arising from the improper completion and use of off-the-shelf governmental pre-approval plans.

Generally, a pre-approved plan from the document provider is reviewed and pre-approved by the IRS for its general use and form. Many of these plans have a lengthy adoption agreement (a check-the-box and/or fill-in-the-blanks component) that is not always easy to understand.

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How Many 457(b) Plans Do You Need?

By Jeff Chang

Many cities and special districts establish and maintain more 457(b) plans than they really need. We routinely see public agencies with as many as two, three or four 457(b) plans. How and why does this happen? And, are there any advantages or disadvantages to doing this?

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Public Agency Board Members’ Worker Classification Matters for Tax Purposes

By Jeff Chang

Due to the IRS’ different treatment of private sector and public agency boards of directors, it comes as little surprise that many California special districts and public agencies continue to classify their board members as independent contractors and report their compensation on Form 1099-MISC — despite the fact that the IRS takes a contrary position.

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When a Section 115 Pension Stabilization Trust is “Too Good To Be True”

By Jeff Chang

To prepare for and manage significantly increased CalPERS employer contribution rates in the coming years, California public agencies  approved the establishment and funding of so-called “pension rate stabilization trusts.” Clients have asked for evaluations of the various turn-key programs being offered for this purpose. In doing so, we have found that many, if not most, agencies are setting aside funds on an “irrevocable” basis. They are doing so exclusively for pension funding purposes, but with an “understanding” that they can gain access to these monies for general agency purposes if needed later. Unfortunately, they can’t — and should not — use these trusts in this way.

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