457 plans

[Murse]

So I have been doing research on 457 plans and have come across a lot of information that has confused me. My understanding is that state 457 plans are put in trusts for the employees, so if something were to happen to the state/local government creditors can not collect it and that private company 457 plans in the event of a bankruptcy are up for grabs by the creditors. Is this correct, or are there exceptions to these rules, or am I wrong?

[MDM]

So I have been doing research on 457 plans and have come across a lot of information that has confused me. My understanding is that state 457 plans are put in trusts for the employees, so if something were to happen to the state/local government creditors can not collect it and that private company 457 plans in the event of a bankruptcy are up for grabs by the creditors. Is this correct, or are there exceptions to these rules, or am I wrong?

That looks correct.

E.g., see https://www.law.cornell.edu/uscode/text/26/457.  In particular,

(g) Governmental plans must maintain set-asides for exclusive benefit of participants
(1) In general
A plan maintained by an eligible employer described in subsection (e)(1)(A) shall not be treated as an eligible deferred compensation plan unless all assets and income of the plan described in subsection (b)(6) are held in trust for the exclusive benefit of participants and their beneficiaries.

[GreenPen]

Thanks for posting this -- both the question and the response! I didn't know this!

[BarkyardBQ]

It also depends on your employer, ask your benefits or HR office if the money you differ is vested or not. If it's vested, it is yours.

[MDM]

It also depends on your employer, ask your benefits or HR office if the money you differ is vested or not. If it's vested, it is yours.

Often "vested" means that "you don't lose it if you leave the company."  That isn't the same as "you still get it if the company goes bankrupt."

[BarkyardBQ]

It also depends on your employer, ask your benefits or HR office if the money you differ is vested or not. If it's vested, it is yours.

Often "vested" means that "you don't lose it if you leave the company."  That isn't the same as "you still get it if the company goes bankrupt."

Vesting may not be the right word, and I cannot find my notes on the terminology. Some employers do not hold the funds, they are paid/contributed just like a 401k/403b.