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Nongovernmental 457b and employer financial security

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  • Nongovernmental 457b and employer financial security

    I'm an employed doc and I've been maxing the 457b (along with 403b) from my nongovernmental employer for almost 20 years. My employer is one of the largest hospitals in the region. In the past my employer has had good finances and the 457b seemed like a good bet. Post covid things haven't been as good. Basically breaking even with some loss post covid although there are plans to recoup. Given the size of my hospital (the biggest player in the region) it's unlikely that they would go under since there isn't enough healthcare services to cover the whole that would be left. There's a good chance that we would either merge or get taken over if the finances worsened. With regard to the 457b, if there's a merger or takeover, can these funds be pulled to pay debts?

  • #2
    Originally posted by pedsmd View Post
    With regard to the 457b, if there's a merger or takeover, can these funds be pulled to pay debts?
    Yes, but it's not likely to happen. (Which isn't reassuring, I know.)

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    • #3
      Originally posted by pedsmd View Post
      it's unlikely that they would go under since there isn't enough healthcare services to cover the whole that would be left.
      Not to address your specific employer, but remember that there is a difference between going bankrupt and ceasing operations. Many institutions may enter bankruptcy in order to reorganize or discharge debts. But, they continue to operate if the underlying business is profitable without the debt payments. In that case, their assets may be used to payoff creditors and they may negotiate with creditors to reduce their debt obligations.

      Doesn't mean it has to happen, but it can. The health system would continue to operate, but its assets and ownership group could get wiped out even if it is not a direct takeover by another system.

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      • #4
        this is one of the harder questions on WCIF if you ask me.

        correct me if i'm wrong that i still don't think we know of a situation where a private 457b was raided?

        one thing that has been helpful to me (i don't know if this even makes sense mathematically) is that i kind of half-arse my 457b now and figure taxable gives me some more "roth like" space.

        so if you ever decide to forgo 457b space remember that you aren't just lighting the money on fire. invest it in taxable and you're exactly where you would be if you chose not to use the 457b (thinkable, mostly rational) or didn't have access to one (common). given that many of this forum are likely going to have some pretty heft RMDs this might not even be the wrong move mathematically.

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