A 1999 arbitrator's decision requires a public employer to make a nonelective contribution to a 457 plan on behalf of "employees who maintain an account".

The union argues that since the contract term
runs from 1997-2000, the intent of the decision was to require the employer to make contributions for active employees AND former employees who left prior to the arbitrator's decision (i.e., in 1998). Aside from the labor issue regarding the meaning of the decision, our position is that Section 457 does not permit retroactive contributions for former employees, and to do so may result in a determination that the plan is ineligible.Our reasoning is that 457 plans are for active employees only, and that an agreement to defer comp or make a contribution must be in place prior to the period in which comp is earned. Sorry for the long-winded message.

Any thoughts?



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My suggestion, since this is already a highly adversarial scenario, would be to draft a plan for IRS approval that would include the arbitrator ordered benefit. If IRS fails to approve, the employer is not the bad guy, the arbitrator caused the problem by not researching the award properly. If the Service approves it, you are safe in proceeding. Discuss with Union's counsel and see if they will buy in. P.S. Been there and done that.

P.P.S.: The arbitrator is supposed to cure impasse, not cause one.