Anyone ever really lost their NG 457?

[Craigy]

jfoxcpacfp wrote:

Larry Ragman wrote:

ENT Doc wrote:

Larry Ragman wrote:

ENT Doc wrote:

Larry Ragman wrote:

ENT Doc wrote:

Larry, I believe the 457f money is still on the employer’s books and is not protected from creditors.

Click to expand…

I reviewed my plan document and stand corrected. While the employer has no claim on the money once it is placed in the 457f, the funds do remain subject to creditors.

Click to expand…

Curious how the 457 could be on the table to be wiped out in the event of a buy-out/merger where the institution being bought hasn’t filed for bankruptcy.  Thought someone posted on this earlier.  This would be my bigger fear – not bankruptcy.

Click to expand…

I think we may be talking past each other. Here is what the plan summary actually says: the institution “may not access the funds (forfeited amounts will stay in the trust to offset future contributions) but funds will be subject to the claims of general creditors.” I interpret in context as follows:

1. Contributions by employer are allocated to individual employee accounts within the company’s 457f plan. These allocations are subject to vesting. If employee leaves before vesting, the remaining funds are redistributed from the employees account to the general 457f account.

2. The company has no access to the funds for any purpose other than 457f distributions.

3. If the company were merged or bought (unlikely, but technically possible), the 457f account would remain a separate trust and continue to operate regardless of the new ownership structure.

4. However, in the event of bankruptcy, the trust assets are available to creditors.

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That would have been my take as well.  But Johanna mentioned a client losing theirs with what appeared to be a buy-out/merger, not a bankruptcy.  Nothing in this article implies Baptist was insolvent at the time:

https://en.wikipedia.org/wiki/Saint_Thomas_-_Midtown_Hospital_(Nashville)

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Hopefully Johanna will weigh back in. I suspect it was a difference between the holding structure of the 457b and a 457f plan since the 457f (at least in my case) is held as a trust.

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That is quite possible and, to be fair, my client may not have fully understood what happened, just that she and her co-workers lost an account not a 457b account. Most employees don’t pay close attention to the details. I was just passing along what she told me and gave the names of the institutions thinking someone might look into it further.

I would hate for this to stand in the way of someone investing in a 457b when, at least impo, there is only a minute chance of losing the money. I had no intent to scare anybody, just to answer the question.

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I briefly googled and couldn't nail it all down, but admittedly I didn't want to spend a lot of time on it.  Bruh, do you know how many hospitals are named baptist.  About three-and-a-half bagillion.  However it is pretty safe to say in this situation it is much more complicated than Baptist being acquired by St. Thomas.

There were definitely liquidity issues with Baptist, its pensions and successor entities.  Here is one example article:  https://www.nashvillepost.com/home/article/20461515/fall-of-a-nonprofit

Often one of the leading motivations in a merger is the insolvency or potential insolvency of the acquired entity.  One side needs money and the other side sees opportunity.

Many of these large hospital systems are a basket case of non-assets and liabilities, able to survive because of the massive, reliable cash flow they produce.  When there is a hiccup, tremor or structural change, the deck of cards falls apart.  The powerholders walk away with the real assets and everyone else fights over the scraps, if they are able to fight at all.

[Brains428]

I guess there could be an argument to have it as a secondary emergency fund (with the obvious problem of taxes). You can get your money for certain emergency situations as outlined by the IRS

https://www.irs.gov/retirement-plans/employee-plans-news-december-17-2010-unforseeable-emergency-distributions-from-457b-plans

 

I'm maxing out my 2019 contribution at the end of this pay period. I'll have 6 months to decide if it's still a good idea to keep contributing.

[artemis]

jfoxcpacfp wrote:

I would hate for this to stand in the way of someone investing in a 457b when, at least impo, there is only a minute chance of losing the money. I had no intent to scare anybody, just to answer the question.

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I agree; I think the bigger risk people face isn't bankruptcy of their institution, but finding out when they leave their current employer that they have to take the 457b money as a single lump-sum distribution.  Not a big deal if you're early in your career and don't have much invested in the account, but a huge deal if you're mid-career (or late career but not yet willing to retire) and the 457b balance is sizable.

If I had to do things over again, I'd have probably invested less in my 457b and more in my taxable account.  But I'm late enough in my career that the only way I'm leaving my current institution is via retirement, which lessens the risk of having a big 457b balance.  I could lose it to a hospital bankruptcy (but that is unlikely), but there's no realistic situation where I'd have to take the entire amount as a lump-sum distribution.

[Tim]

Anecdotal examples of negatives seem to take on a life of their own. I am surprised only one example has been mentioned here and one Orange County thing in 1995 (20% haircut). From just a numbers perspective, the personal bankruptcy protection seems to be tremendously a lot more common and probable.
I didn’t count the search results. Asset protection seems to be a lot more common than asset loss.

[Tim]

No knowledge of the particular case. The word “merger” is often misleading. The structure of the deal is usually buy the legal entity or buy specific assets and liabilities.
If one buys the entity, the new owner’s can declare it bankrupt or actually negotiate with creditors. One can also buy only secured assets or just the assets striking deals with secured creditors.
Two step process, severance agreement and a new employment contract would be a guess under either scenario. It would be rare for employees to get legally involved in any M&A.

[jfoxcpacfp]

Larry Ragman wrote:

ENT Doc wrote:

Larry Ragman wrote:

ENT Doc wrote:

Larry Ragman wrote:

ENT Doc wrote:

Larry, I believe the 457f money is still on the employer’s books and is not protected from creditors.

Click to expand…

I reviewed my plan document and stand corrected. While the employer has no claim on the money once it is placed in the 457f, the funds do remain subject to creditors.

Click to expand…

Curious how the 457 could be on the table to be wiped out in the event of a buy-out/merger where the institution being bought hasn’t filed for bankruptcy.  Thought someone posted on this earlier.  This would be my bigger fear – not bankruptcy.

Click to expand…

I think we may be talking past each other. Here is what the plan summary actually says: the institution “may not access the funds (forfeited amounts will stay in the trust to offset future contributions) but funds will be subject to the claims of general creditors.” I interpret in context as follows:

1. Contributions by employer are allocated to individual employee accounts within the company’s 457f plan. These allocations are subject to vesting. If employee leaves before vesting, the remaining funds are redistributed from the employees account to the general 457f account.

2. The company has no access to the funds for any purpose other than 457f distributions.

3. If the company were merged or bought (unlikely, but technically possible), the 457f account would remain a separate trust and continue to operate regardless of the new ownership structure.

4. However, in the event of bankruptcy, the trust assets are available to creditors.

Click to expand…

That would have been my take as well.  But Johanna mentioned a client losing theirs with what appeared to be a buy-out/merger, not a bankruptcy.  Nothing in this article implies Baptist was insolvent at the time:

https://en.wikipedia.org/wiki/Saint_Thomas_-_Midtown_Hospital_(Nashville)

Click to expand…

Hopefully Johanna will weigh back in. I suspect it was a difference between the holding structure of the 457b and a 457f plan since the 457f (at least in my case) is held as a trust.

Click to expand...

That is quite possible and, to be fair, my client may not have fully understood what happened, just that she and her co-workers lost an account not a 457b account. Most employees don't pay close attention to the details. I was just passing along what she told me and gave the names of the institutions thinking someone might look into it further.

I would hate for this to stand in the way of someone investing in a 457b when, at least impo, there is only a minute chance of losing the money. I had no intent to scare anybody, just to answer the question.

[ENT Doc]

Larry Ragman wrote:

ENT Doc wrote:

Larry Ragman wrote:

ENT Doc wrote:

Larry Ragman wrote:

ENT Doc wrote:

Larry, I believe the 457f money is still on the employer’s books and is not protected from creditors.

Click to expand…

I reviewed my plan document and stand corrected. While the employer has no claim on the money once it is placed in the 457f, the funds do remain subject to creditors.

Click to expand…

Curious how the 457 could be on the table to be wiped out in the event of a buy-out/merger where the institution being bought hasn’t filed for bankruptcy.  Thought someone posted on this earlier.  This would be my bigger fear – not bankruptcy.

Click to expand…

I think we may be talking past each other. Here is what the plan summary actually says: the institution “may not access the funds (forfeited amounts will stay in the trust to offset future contributions) but funds will be subject to the claims of general creditors.” I interpret in context as follows:

1. Contributions by employer are allocated to individual employee accounts within the company’s 457f plan. These allocations are subject to vesting. If employee leaves before vesting, the remaining funds are redistributed from the employees account to the general 457f account.

2. The company has no access to the funds for any purpose other than 457f distributions.

3. If the company were merged or bought (unlikely, but technically possible), the 457f account would remain a separate trust and continue to operate regardless of the new ownership structure.

4. However, in the event of bankruptcy, the trust assets are available to creditors.

Click to expand…

That would have been my take as well.  But Johanna mentioned a client losing theirs with what appeared to be a buy-out/merger, not a bankruptcy.  Nothing in this article implies Baptist was insolvent at the time:

https://en.wikipedia.org/wiki/Saint_Thomas_-_Midtown_Hospital_(Nashville)

Click to expand…

Hopefully Johanna will weigh back in. I suspect it was a difference between the holding structure of the 457b and a 457f plan since the 457f (at least in my case) is held as a trust.

Click to expand...

I've never seen this sort of thing come up but was curious enough to email the IRS.  We'll see what they say!

[Larry Ragman]

ENT Doc wrote:

Larry Ragman wrote:

ENT Doc wrote:

Larry Ragman wrote:

ENT Doc wrote:

Larry, I believe the 457f money is still on the employer’s books and is not protected from creditors.

Click to expand…

I reviewed my plan document and stand corrected. While the employer has no claim on the money once it is placed in the 457f, the funds do remain subject to creditors.

Click to expand…

Curious how the 457 could be on the table to be wiped out in the event of a buy-out/merger where the institution being bought hasn’t filed for bankruptcy.  Thought someone posted on this earlier.  This would be my bigger fear – not bankruptcy.

Click to expand…

I think we may be talking past each other. Here is what the plan summary actually says: the institution “may not access the funds (forfeited amounts will stay in the trust to offset future contributions) but funds will be subject to the claims of general creditors.” I interpret in context as follows:

1. Contributions by employer are allocated to individual employee accounts within the company’s 457f plan. These allocations are subject to vesting. If employee leaves before vesting, the remaining funds are redistributed from the employees account to the general 457f account.

2. The company has no access to the funds for any purpose other than 457f distributions.

3. If the company were merged or bought (unlikely, but technically possible), the 457f account would remain a separate trust and continue to operate regardless of the new ownership structure.

4. However, in the event of bankruptcy, the trust assets are available to creditors.

Click to expand…

That would have been my take as well.  But Johanna mentioned a client losing theirs with what appeared to be a buy-out/merger, not a bankruptcy.  Nothing in this article implies Baptist was insolvent at the time:

https://en.wikipedia.org/wiki/Saint_Thomas_-_Midtown_Hospital_(Nashville)

Click to expand...

Hopefully Johanna will weigh back in. I suspect it was a difference between the holding structure of the 457b and a 457f plan since the 457f (at least in my case) is held as a trust.

[artemis]

I think funding the non-gov 457b for a few years, then stopping in favor of funding a taxable account, then starting to fund it again 5 years or so before retirement is a good "middle of the road" option for a young physician to consider.  The early contributions should benefit from a long interval of tax-free growth, but the overall size of the account won't grow so large that being forced to take a lump-sum distribution upon changing employers or (worse) losing the funds in a hospital bankruptcy will be completely crippling.  And I'd certainly recommend funding a HSA, 401k/403b, and Roth IRA fully before even considering using a non-gov 457b!  The amount of tax-free investing space it offers is very tempting, but the risk of loss is very real.

[wonka31]

ENT Doc-Yes to all of what you said in your previous post. I agree that although these issues have been government driven by the incentives made to institutions, the majority (foolishly in my opinion) expect the government to be able to fix it. You have to get more money to fix the issues which most recently has involved either quantitative easing (print some money) or tax more (redistribute the money).

[ENT Doc]

Larry Ragman wrote:

ENT Doc wrote:

Larry Ragman wrote:

ENT Doc wrote:

Larry, I believe the 457f money is still on the employer’s books and is not protected from creditors.

Click to expand…

I reviewed my plan document and stand corrected. While the employer has no claim on the money once it is placed in the 457f, the funds do remain subject to creditors.

Click to expand…

Curious how the 457 could be on the table to be wiped out in the event of a buy-out/merger where the institution being bought hasn’t filed for bankruptcy.  Thought someone posted on this earlier.  This would be my bigger fear – not bankruptcy.

Click to expand…

I think we may be talking past each other. Here is what the plan summary actually says: the institution “may not access the funds (forfeited amounts will stay in the trust to offset future contributions) but funds will be subject to the claims of general creditors.” I interpret in context as follows:

1. Contributions by employer are allocated to individual employee accounts within the company’s 457f plan. These allocations are subject to vesting. If employee leaves before vesting, the remaining funds are redistributed from the employees account to the general 457f account.

2. The company has no access to the funds for any purpose other than 457f distributions.

3. If the company were merged or bought (unlikely, but technically possible), the 457f account would remain a separate trust and continue to operate regardless of the new ownership structure.

4. However, in the event of bankruptcy, the trust assets are available to creditors.

Click to expand...

That would have been my take as well.  But Johanna mentioned a client losing theirs with what appeared to be a buy-out/merger, not a bankruptcy.  Nothing in this article implies Baptist was insolvent at the time:

https://en.wikipedia.org/wiki/Saint_Thomas_-_Midtown_Hospital_(Nashville)

[Larry Ragman]

ENT Doc wrote:

Larry Ragman wrote:

ENT Doc wrote:

Larry, I believe the 457f money is still on the employer’s books and is not protected from creditors.

Click to expand…

I reviewed my plan document and stand corrected. While the employer has no claim on the money once it is placed in the 457f, the funds do remain subject to creditors.

Click to expand…

Curious how the 457 could be on the table to be wiped out in the event of a buy-out/merger where the institution being bought hasn’t filed for bankruptcy.  Thought someone posted on this earlier.  This would be my bigger fear – not bankruptcy.

Click to expand...

I think we may be talking past each other. Here is what the plan summary actually says: the institution "may not access the funds (forfeited amounts will stay in the trust to offset future contributions) but funds will be subject to the claims of general creditors." I interpret in context as follows:

1. Contributions by employer are allocated to individual employee accounts within the company's 457f plan. These allocations are subject to vesting. If employee leaves before vesting, the remaining funds are redistributed from the employees account to the general 457f account.

2. The company has no access to the funds for any purpose other than 457f distributions.

3. If the company were merged or bought (unlikely, but technically possible), the 457f account would remain a separate trust and continue to operate regardless of the new ownership structure.

4. However, in the event of bankruptcy, the trust assets are available to creditors.

[ENT Doc]

wonka31 wrote:

Although they are currently talking about ultra high earners (which I am not), I do wonder if the ‘high earner’ threshold is lowered. I typically don’t play the boogie man or the ‘what if’ game, however money is going to have to come from somewhere for two major crises in this country: healthcare and college cost/student loan debt.

Click to expand...

Rest assured, there is no way the liabilities can be funded strictly by taxing the mega wealthy's salaries.  These socialist utopias in Europe hit everyone up for a 15%+ VAT as well as ridiculously high marginal rates on middle-class citizens.  Interesting that the two major crises in our country were both created by our government yet some want the government to fix the problems.  Push the narrative that college is necessary and guarantee funds for education regardless of institution and major or quality of the student?  Prices will escalate, and they have.  Tie payments to a formula that has more to do with volume and costs rather than value?  Prices will escalate, and they have.  The market doesn't like inefficiencies and distortions.  The vast majorities of monopolies and distortions in the marketplace can be tied directly to government action.

[wonka31]

Lordosis-I think you illustrate some points on exactly why I chose to stop using mine. Although I am in a large, stable organization, I’m not entirely sure what my future will hold. Whitebeard made some points, which is something I think about frequently. Mergers and acquisitions have been on a year in healthcare and I’m thinking that doesn’t slow down.

Lastly, I do wonder what our future tax bracket structure looks like. Although I always (and still kind of) feel that raising taxes is career suicide for politicians, I’m finding that is a less common narrative. It’s only hurts their voters if those specific voters have their taxes increased. The narrative of ‘tax the wealthy, tax the high earners’ is quite strong. Although they are currently talking about ultra high earners (which I am not), I do wonder if the ‘high earner’ threshold is lowered.

I typically don’t play the boogie man or the ‘what if’ game, however money is going to have to come from somewhere for two major crises in this country: healthcare and college cost/student loan debt.

[ENT Doc]

Larry Ragman wrote:

ENT Doc wrote:

Larry, I believe the 457f money is still on the employer’s books and is not protected from creditors.

Click to expand…

I reviewed my plan document and stand corrected. While the employer has no claim on the money once it is placed in the 457f, the funds do remain subject to creditors.

Click to expand...

Curious how the 457 could be on the table to be wiped out in the event of a buy-out/merger where the institution being bought hasn't filed for bankruptcy.  Thought someone posted on this earlier.  This would be my bigger fear - not bankruptcy.