457(b) Plan
Does anyone know whether a 457(b), through a county employer, can be directly transferred to an IRA upon separation from service?
Does anyone know whether a 457(b), through a county employer, can be directly transferred to an IRA upon separation from service?
Permalink Submitted by Alan Spross on Wed, 2008-10-08 01:05
Yes, a government 457b plan can be directly rolled to an IRA after separation from service.
However, if you are not yet 59.5, you must adhere to a complex 72t distribution plan to get penalty free distributions out of that IRA. The 457b is not a qualified retirement plan, and therefore there is no early withdrawal penalty on distributions from the plan. Therefore, if you are not yet 59.5, if may be wise to check if you can get flexible distributions directly from the plan in order to avoid having to start a 72t plan.
If you are totally sure that you will not need pre 59.5 distributions, then the IRA direct rollover would work fine.
Permalink Submitted by BruceM on Thu, 2008-10-09 04:06
Alan
Are you saying that if a 457(b) is comingled with a TIRA, then the TIRA withdrawal rules apply…that is, the 457 assets would be subject to the 10% early withdrawal penalty due to being ‘mixed in’ with TIRA assets?
If so, would transferring and maintaining the 457(b) in a conduit TIRA maintain its penalty free withdrawal character, if the individual is
Permalink Submitted by Alan Spross on Thu, 2008-10-09 04:26
Bruce,
Yes, once these funds get into a TIRA, they become TIRA funds in all respects and totally lose all their 457b characteristics. A conduit IRA would not help.
Also, note that the reverse is not necessarily true, ie. if TIRA assets were accepted by a 457b in a rollover, and subsequently distributed back out of the 457b, they would be subject to the early withdrawal penalty of Sec 72t, even though the 457b funds themselves are exempt from that penalty because the 457b is not a qualified plan.
Permalink Submitted by BruceM on Tue, 2008-10-14 19:22
Alan
Good to know!
Thanks
BruceM