I have been talking back and forth with our HR/payroll department and they have been telling me that I am ineligible to contribute to a 457 plan because I am eligible for the Wisconsin Retirement System (WRS) pension. Here is the latest explanation I received from HR:
The 457 plan is offered in the District to those employees who are not eligible for the WRS/etf pension. The IRS has rules about employees contributing/not contributing to FICA-Social Security. The IRS does not just "allow" a business entity to open a 457 plan for its employees. Many, many rules and regulations safeguard this plan which is available to very few entities on a limited basis.
Employees of the District fall into one of two categories:
1) Full time status --> WRS/pension eligible - contributions through state-mandated payroll deductions. If an employee is FT, they MUST contribute to FICA-SS. These employees are NOT eligible to the 457/Alternative FICA. FT employees contribute the state-designated percent to their WRS pension which is 100% matched by the School District.
2) Part time status --> NOT WRS/pension eligible. These employees contribute to 457/Alternative FICA. This means that they do NOT pay the 6.2% FICA-SS tax. Instead, 7.5% of their income is deducted/contributed to the government allowed 457/Alternative FICA plan which is solely in their name, unlike FICA-SS that is more-or-less a black hole.
An employee cannot have it both ways. Either you are full-time and have the benefit of contributing to the WRS pension (which is wholly matched by the District), or, you are part-time, not eligible to the WRS pension and are allowed, by IRS regulations, to contribute to a 457 plan (ALTERNATIVE FICA).
Does anyone have any experience with this or could you speak to the truth in this? I've read of many other teachers in other states that have pension programs that are allowed to pay into a 457. Seems fishy to me.