457 Plans
March 18th, 2010
Rollover 457 Plan to an IRA
What is a 457 Plan or 457 retirement plans?
A 457 plan or a 457 retirement plan is a retirement plan offered by state and local governments and private tax exempt organizations. State and local governments and private tax exempt organizations may offer retirement plans to their employees that function similar to 401k retirement plans in terms of salary reduction contributions and deferred growth of earnings.
Why is a 457 plan called 457 plan?
The Internal Revenue Code section that defines the rules is Section 457, hence the name 457 Plan.
How can I rollover 457 plan into an IRA?
Since 457 retirement plans are non qualified deferred compensation plans, 457 retirement plans were not eligible for an IRA Rollover before 2002.
Can an I rollover a 457 plan into an IRA now?
Effective 2002, governmental 457 retirement plans (but not private tax exempt organization 457 retirement plans) are eligible for IRA Rollover into an traditional IRA, Roth IRA, or a qualified plan, such as a 401k.
What can I do if I am not allowed to rollover my 457 plan into an IRA?
From a tax standpoint, if you are not permitted to rollover the 457 Plan over to an IRA, you may wish to explore the 457 plan distribution options available (possibly spreading payments out over of a number of years) under the terms of the 457 Plan to determine the most suitable method to withdraw their balance.
Are 457 plan distributions subject to the 10% early withdrawal penalty similar to a 401k distribution or IRA distribution?
No. 457 plan distributions are not subject to the same 10% early withdrawal penalty as 401k or IRA.
457 plan distributions, including lump sum amounts, are fully taxable with no 10% penalty even if a 457 plan distribution recipient is under age 59 �.
Can a 457 Plan make loans?
No. 457 retirement plans may not allow loans to participants in the same way a 401k plan allows.
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