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Anyone ever really lost their NG 457?

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  • Anyone ever really lost their NG 457?

    There was a recent article on the WCI about 457's.  Having read the portion about Non-governmental 457's being at risk to be taken by your bankrupt company, it made me wonder if it had ever really happened.  I searched the web and could not find a case where it did.

    Does anyone else have any info on how often people lose on the 457 or has it just been a theoretical risk?

  • #2
    I have a client in Nashville who told me she lost hers after St. Thomas took over Baptist Hospital. I don't know the whole story as she wasn't a client at the time but, yes, this does happen and it was pretty traumatic for her. I'm sure many employees were affected.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      I don't know of any 457 losses, but I know of several SERP losses at commercial companies.

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      • #4
        If your 457 retirement plan is with an institution that is at risk for bankruptcy, then your 457 is at risk.  The 457 retirement plan is a deferred compensation plan.  Anything that would prevent the employer from paying out your already earned, but deferred, compensation will put your 457 funds at risk, namely a bankruptcy.  In a bankruptcy, the funds held in the 457 plan go to the creditors, not to the employees.

        My 457 is with a large university with many billions of dollars in their endowment.  I feel it is quite safe, but you never know.

        The bottom line... If I was working for a smaller or even larger size, non-governmental hospital system at risk for poor financial performance or for takeover, I would not participate in the 457 plan.  The risk is too high for losing it all.

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        • #5
          Thanks for the fast replies.

          Here's the issue, small community hospital, given the changes in medicine reimbursement, changes in payor mix (we are now at 80% medicare/medicaid), and poor management,  the hospital is pretty strapped.  Reportedly, no talk of bankruptcy or buyout but it is concerning to me.

          Given the issues, better to take the money early and pay the current tax bracket penalty which would be high, or ride it out hoping for the best?  Have 200K in the 457.

          So, take it out and eat 70K in taxes but keep 130K.  Ride it out and maybe lose 200K.

          A few years ago when we had a shaky period, I stopped funding for 2 years.  This seems a little worse at this time, but only time will tell if the ship gets righted.

          TR

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          • #6
            Can you get a copy of the audited financial statements and review with your CPA? This is a tough call, would have to be really bad for me to recommend removing. Have you considered looking for another job at another NPO with a 457b? It is possible to r/o into another NPO 457b and it sounds like you may be doubly at risk - your job and your retirement plan.
            Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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            • #7
              I'd have to start traveling for locums or move to get a new job.  Still getting paid well at this time so don't want to jump ship yet.  Usually the financials come out about a year or more after the fact.  Found the 2016 financials to the community last week.

              You have my take.  It's hard for me to just pull it out but I will keep my ear to the ground, if things look to be turning might be time to bail and take the money out at the same time.

              Thanks,

              TR

               

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              • #8
                NPOs have to file annual income tax returns. You should be able to look up the Form 990 online at GuideStar. They used to be free, but I haven't checked lately. However, it would be worth paying a fee to review them. Your CPA should be helpful in interpretation. The taxes are prepared based upon the audited financials, so the reports should not be no less than a year out of date. I think you may need to do some digging.

                Also check out this article: Where can I find an organization's Form 990 or 990-PF? Good luck.
                Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                • #9
                  The dual risk (income and deferred comp) deserves pause. Tax is both income and the growth. My question would be :
                  1) Ways to roll into pre tax .
                  2) Ways to roll into post tax (Roth type).
                  3) Ways to get funds out.

                  Keep in mind that preferential payments in bankruptcy put both you and the hospital at risk. By the time you become aware of it, it may be too late. Don’t let the tax tail be the deciding factor in your risk assessment. Good luck.

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                  • #10




                    1) Ways to roll into pre tax .
                    2) Ways to roll into post tax (Roth type).


                    Non-government 457 plans can not be rolled over to an IRA or any other retirement plan except another non-government plan and then only if they accept (very few of which do).

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                    • #11


                      Non-government 457 plans can not be rolled over to an IRA or any other retirement plan except another non-government plan and then only if they accept (very few of which do).

                      I'm glad you posted that. I have never seen it happen but that's just because we haven't had a client move from one NPO to another and make the attempt. Not sure if it's just a really unusual event or just our experience so far. Helpful to know that. I suppose because each plan is customized?
                      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                      • #12
                        I was able to easily roll over my NG 457 between two employers. I think most non-governmental 457 plans will allow rollovers from others, at least that is the impression I got from Fidelity at the time I did the rollover.

                         

                        Joanna your post above was helpful, as that is the first time I have heard of someone losing such an account. Is there anyone else out there who can cite an actual instance of an employee losing their NG 457? I have been curious about this for a long time. I work for a massive health system that by all appearances is financially sound, and I max out my 457 because I like the tax benefit and it has great investment options. I also max out all other pre-tax retirement vehicles (including a backdoor Roth), contribute robustly to a taxable account, am aggressively paying off mortgage and funding kids 529 plans. As I watch the 457 grow, it obviously makes me a bit nervous that this could be at risk to a creditor, however I just can't part with the tax benefit. Would love to hear if anyone else knows of someone losing such an account, I searched all over the internet and could find no examples.

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                        • #13
                          Didn't PoF get stuck in a failing hospital? I wonder if he had a 457 at the time. Maybe he will chime in.

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                          • #14
                            I know PoF has a 457b at his current gig. I would love to hear from him and others about what decision they made about the mechanics of withdrawal. I have to make an irrevocable distribution schedule whenever I separate from my employer. Currently the balance is between $100k and 150k. Hard to decide how to do it with little certainty of future income and tax rates.

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                            • #15
                              I contributed for a few years, now I do not. My system is in very good shape, and the distribution across up to five years is reasonable. My issue is that there is some, although I believe it to be a small, risk and I do not believe that taxes will be going down in the future. I don’t know that I am getting much, if any, gain while taking on some risk. It was no longer worth it to me, thus I stopped contributing.

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