Although I used to work in the 'ee benefits field (which is how I know about these message boards), right now I am just acting as a private individual trying to decide whether and how much to invest in the 457(b) plan [or is it a 457(f) plan? -- I can't tell from my statements!] of my current employer-- a 501©(3) hospital -- after maxing out its 403(b). I understand that, for the plan to qualify under 457(b) or (f), the assets MUST be subject to the hospital's creditors should the hospital become insolvent.

My question is whether anyone has ever known an ACTUAL case where creditors tapped a non-profit's 457 plan assets? (In actuality or theoretically, does or would the 457(b) or 457(f) designation make any difference in this respect?)

I know there are no guarantees (by definition, in order to get the tax deferral!), but I'm trying to ascertain the realistic probability of my deferrals being taken by future creditors (in the event of 'er bankruptcy), based on past and present 457 plan experiences during employer bankruptcy.

I've looked online at other sources and just can't seem to find the answer to my question. I hope you can help. Thanks in advance.

If you are deciding how much "to invest," you hope it is a 457(b) plan. The informal postion of the IRS is disbelief that anyone would subject good money to a substantial risk of forfeiture. Exposure to creditors of the employer is an entirely different matter and is not considered to be a substantial risk of forfeiture. That, in turn, is not a comment on your risk of employer bankruptcy.

Yes, thanks for the reply: my HR dept says it is indeed a 457(b). Has anyone ever heard of a non-profit plan's 457(b) assets actually being ever taken by creditors?

I know Orange County's state and local 'ees lost some 457 plan assets decades ago (and there was reform to protect against that happening again in 1996). But how about 457(b) plan assets for non-profits? Any real stories of loss?

Here's a recent example of a municipality filing for Chap 9 Bankruptcy

http://cbs5.com/breakingnewsalerts/vallejo...y.2.731419.html

I have no idea what this means for any 457(b) plans held by police or fire, although because these are Govt 'funded' plans, I suspect that they are safe, but not sure.

But from the other side, can your own creditors access your 457(b) plan? Consider the 1993 Leadbetter case. The 6th curcuit court rulled that Leadbetter's Govt 457(b) plan is accessible by Leadbetter's creditors when he filed for bankruptcy. Take a look at the case disposition at

http://bulk.resource.org/courts.gov/c/F2/9...16.91-3076.html

To skip all the legalese, go to the bottom of the ruling, where it says

For the foregoing reasons, we AFFIRM the district court affirmance of the bankruptcy court's order to turnover the deferred compensation to the bankruptcy trustee."[/
BruceM

[quote name='BruceC' date='Jun 13 2008, 04:35 PM' post='164005']
Here's a recent example of a municipality filing for Chap 9 Bankruptcy

http://cbs5.com/breakingnewsalerts/vallejo...y.2.731419.html

I have no idea what this means for any 457(b) plans held by police or fire, although because these are Govt 'funded' plans, I suspect that they are safe, but not sure.

But from the other side, can your own creditors access your 457(b) plan? Consider the 1993 Leadbetter case. The 6th curcuit court rulled that Leadbetter's Govt 457(b) plan is accessible by Leadbetter's creditors when he filed for bankruptcy. Take a look at the case disposition at

http://bulk.resource.org/courts.gov/c/F2/9...16.91-3076.html

To skip all the legalese, go to the bottom of the ruling, where it says

For the foregoing reasons, we AFFIRM the district court affirmance of the bankruptcy court's order to turnover the deferred compensation to the bankruptcy trustee."[/

BruceM
[/quot0e]

Bruce:

Under changes to the bankruptcy law enacted in 2005, 457 plan assets are protected from the employee's creditors in bankruptcy regardless of the amount.

I don't know of any specific instances, but even if I did I'm not sure how that information could be helpful to you. I think the more pertinent inquiry is "why wouldn't I be a mere general creditor vis a vis my 457(b) account in the event of my employer's bankruptcy?" I can't think of a good reason why you might hope to have any preference beyond that of a general creditor (and behind secured creditors).