457 Question
I have a client who has a 457 Deferred Compensation Plan through the township they work for. The plan is extremely expensive and the investment options limited. I’ve been doing some research and from what I can find it seems as though the option for an IRA Rollover does not exist unless his employment is terminated or the plan is cancelled.
Is this correct?
I understand this is the case with 401(k)’s. But is this also exactly the same for 457’s?
It is an unfortunate situation because it is an advantage for the client to have the pretax, but the rest of the investment is inferior. Along with maintenace charges and premium charges it also has a 5% surrender charge on any contributions made within the last 5 years. For this reason alone it will not be an investment the client will be contributing to soon anyway.
Is there any way to roll this out now?
Thanks.
K
Permalink Submitted by Alan Spross on Wed, 2008-05-21 22:46
Basically, most 457 plans do not allow in service distributions other than hardship type distributions that are not eligible for rollover. There is usually no age at which in service distributions can be taken as there is for 403b plans at age 59.5.
Permalink Submitted by Kyle Vitale on Thu, 2008-05-22 13:15
Yeah, that is what I figured but somebody I bumped into who was quite “qualified” swore up and down it could be done.
Hmmm….well looking beyond that at the moment I wonder what would be a good alternative for this client? He makes 130,000 a year so that makes it tough for a Roth and he wants to contribute more than 5,000 anyway. Besides an annuity (which I’d prefer to avoid), does anyone have a recommendation? Perhaps a non-deductible IRA? I’m just thinking out loud here. I like to hear some opinions. Maybe someone will mention something I haven’t thought off.
Thanks,
K