Michael A. Webb, Vice President, Retirement Plan Services, Cammack LaRhette Consulting, answers:
The reason you may have not come across a 415(m) plan in your previous working career is that such plans are indeed unique to public employers, including public primary and secondary schools, colleges and universities. Also known as a 415(m) excess benefit plan, named for the Section of the Code that was added in 1996 by the Small Business Jobs Protection Act, this type of plan is utilized for contributions that cannot be made to a 403(b) or other qualified plan, including a defined benefit plan due to the application of the contribution/benefit limits under Code Section 415. Any contributions in excess of the limit are made to this separate 415(m) plan.
Unlike 403(b) and other qualified plans, 415(m) plans are unfunded and subject to the creditors of the institution; assets are not owned by the employee until distributed. In many aspects, these plans are similar to 457(b) deferred compensation plans of private tax-exempts, except for the fact that loans are permitted.
Such plans used to be extremely popular at public institutions years ago when the contribution limits under Section 415 were much lower, but increases in the 415 limit over the last several years has reduced both the amount of contributions as well as the number of participants eligible for such plans.
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