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I’m JS Philly. I’ll post this on both the 403 and 457bs groups as I am concerned with both. I’ll keep this brief and add later if I see I can help in any way. I’ll keep it positive, but my story is ugly.

 

I was illegally terminated from my position at the S.D. of Philadelphia (SDP) and reinstated by the state legal authority. The SDP had on several counts violated the School Law of 1949 and federal due process (Section 1983). A year later I finally got my back pay lump sum and the new problems began.

 

Reinstatement means reinstated to former position with all rights and privileges and be made whole. The SDP payroll refused to make the backup 403 and 467b contributions I requested. Furthermore, they withheld Federal income tax at 33.4% without any consultation (Trump style).

 

I studied IRS and DOL documents related to 403 and 457b. Regulation seems very unclear, but I won’t bore you with details. IRS seems to allow for makeup 403 & 457b contributions and seems only to require that this is earned income (W2 monies). I fully comply. The DOL has jurisdiction for 401Ks, but supposedly not for 403 & 457b. This is not very clear. It is odd because they are all, 401,403 & 457, are represented as ERISA plans.

 

Between lawyer’s fees, payroll deductions and my projected CPA costs (amended returns), I will finish this period losing money even though I was complete reinstated from the bogus situation.

 

What do I need? Ideas to generate leverage to pressure the SDP to make the backup 403 and 457b contributions. This rather easy remedy (back contributions) alone would do a lot to fix my situation.

 

Recommendations for lawyers/tax accountants pro-bono or otherwise would be appreciated (note: the circumstances are unusual).

 

My problem is one aspect of a bigger problem we all share. Regulation and compliance of 403 & 457b is very weak. If you have a problem even roughly resembling mine, you will be on the losing side of regulation, as I am now. Our solution, and 403bwise is making an effort, is more muscular lobbying for the owners of 403 and 457b plans. I don’t know how to get there, but we badly need it. I fear situations like mine will only get more common. Be vigilant.

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13 hours ago, JS77 said:

IRS seems to allow for makeup 403 & 457b contributions

This would be news to me. You should post links to the IRS documentation, I’d like to read it.

I personally would be extremely hesitant to pay a lawyer with the hopes of reclaiming tax advantages space from previous years. That space has a finite value and lawyers can easily overwhelm that value.

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13 hours ago, JS77 said:

they withheld Federal income tax at 33.4% without any consultation

That comes out in the wash. If they withheld too much, you’ll just get it back at tax time. You can also change your current withholding to minimize future tax payments if you’re convinced you’ve already paid enough. 

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I don't understand what happened to your 403b and 457 accounts. Are you trying to make contributions for the year(s?) during which you were unemployed? I agree with Ed that employee contributions cannot be made for years when you were not employed. If you want a definitive answer, you should explain your problem on the Boglehead forum. Posters Spirit Rider and Allan S. are experts on IRS regulations concerning 403b and 457b plans.

I believe you'll find that neither 403b nor 457b public school district plans are governed by ERISA. 

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11 hours ago, EdLaFave said:

This would be news to me. You should post links to the IRS documentation, I’d like to read it.

I personally would be extremely hesitant to pay a lawyer with the hopes of reclaiming tax advantages space from previous years. That space has a finite value and lawyers can easily overwhelm that value.

As I said IRS/DOL docs are very fuzzy.  Years ago I set up 401ks for a foreign company here in the US.  I was warned many times about violating "universal availability".  Universal availability seems to apply to to 403/457bs.  I participated in the 403/457b prior to illegal termination.  Termination was illegal.  I have w2 income from  period  of the illegal termination now.  Was I unemployed?

Second reference is less clear:  5 year rule for non-elective contributions.  The example given is for a minister.  The principal is some sort of contribution can be made up until 5 years after last year of service.  Screens from Pub. 571 are attached.

We too often ignore the purpose of legislation like ERISA. It is here to help save for retirement.  We construct obscure rules.  There is w2 inccome from the period of termination.  Back contributions should be made.

I agree with you on lawyers.  Good ones are hard to find.  Thanks for your comments, Ed.

Universal availability.jpg

5yr.jpg

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7 hours ago, krow36 said:

I don't understand what happened to your 403b and 457 accounts. Are you trying to make contributions for the year(s?) during which you were unemployed? I agree with Ed that employee contributions cannot be made for years when you were not employed. If you want a definitive answer, you should explain your problem on the Boglehead forum. Posters Spirit Rider and Allan S. are experts on IRS regulations concerning 403b and 457b plans.

I believe you'll find that neither 403b nor 457b public school district plans are governed by ERISA. 

Thanks, I'll be looking for Spirit Rider and Allan S. (couldn't find Allan).  If you have w2 money for a period of time were you unemployed?  Feel free to jump in on this one as I need to know.  Thanks.

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