Monique Morrissey Photo

Monique Morrissey's areas of expertise include retirement security, labor markets, and financial markets.

The board members of the Calhoun Port Authority enjoy more retirement tax breaks than the average person.

They have a 457(b) retirement plan. It is similar to a 401(k) plan but is maintained by state and local governments.

In both, the employer and employee can contribute an amount that is not taxed until after it has been invested, accrues interest and is withdrawn.

But Monique Morrissey, of the Economic Policy Institute in Washington, D.C., pointed out key differences.

A 457(b) plan allows board members to contribute up to the greater of $18,500 or 100 percent of their compensation from the port every year.

Morrissey, who is not a tax lawyer and is unfamiliar with the Calhoun Port Authority, said that means even board members who the port has paid more than $100,000 to during the past decade could have put all of that into the 457(b) plan to avoid paying as much in taxes on it.

“And it would be financially advantageous to do that because a board member making over $100,000 over 10 years is making about $10,000 a year. That’s below the ($18,500) limit,” she said.

Morrissey said the board members could do this on top of contributing to any 401(k) or individual retirement account they have from a current or previous job in the private sector.

She said additionally, they can make “catch-up” contributions. When they are 50 or older, the contributions can be $6,000 per year. And when they are within three years of retirement age and if they hadn’t contributed their entire compensation to the 457(b) plan, they can make a contribution that makes up that difference.

“Another advantage of 457(b) plans is that you may be able to withdraw the money at a somewhat younger age without paying a penalty,” Morrissey said, but most would advise against that.

“Note that these tax advantages don’t cost the port anything – they cost federal taxpayers,” Morrissey said. “So you could argue that it’s smart for the port to offer this benefit to board members. The part that’s costly to the port is, of course, the employer contribution.”

The port’s contribution to the plan is currently $125 per month, but records show that in the past decade, the port’s contributions to board members’ 457(b) plans have totaled $89,000.

The Calhoun Port Authority also might be required to file 1099 forms for each board member. According to the IRS’ website, a 1099 form is for miscellaneous income and one must be filed for each person to whom an employer has paid more than $600 per year.

The Victoria Advocate requested the port’s 1099 forms under the Texas Public Information Act, but the port is asking the Texas Attorney General if it can withhold them.

The port “believes that such information is confidential tax information,” wrote Sandra Witte, one of the port’s attorneys.

Cecilia Barreda, an IRS spokeswoman, declined to comment about the Calhoun Port Authority, but data from the agency shows that more than 3 million taxpayers participate in 457(b) plans.

The data also shows that employers contributed and employees deferred more than $14 million in 2014. Barreda said the IRS does not track how common it is for elected board members to participate in 457(b) plans.

Jessica Priest reports on the environment and Calhoun County for the Victoria Advocate. She may be reached at jpriest@vicad.com or 361-580-6521.

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Environment/Investigations Reporter

Jessica Priest has done a little bit of everything since moving to Victoria in 2012. She was a regular fixture in the Crossroads’ historic courthouses, but now slathers on the sunscreen to report on the environment.

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