def comp plan to IRA
I have a situation where a 457 plan has already been transferred/rolled over company to company to an IRA. It appears that the def comp was thought to be from a government entity but the credit union is not a government entity.
Can the transaction be reversed? Or since the employee was terminated could they do a rollover. Please advise ASAP. Thank you
[b] 😯 [/b]
Permalink Submitted by Alan Spross on Thu, 2008-12-18 23:38
If it was not a govt 457, it is a taxable distribution and must be treated as an excess contribution to the IRA and removed ASAP, at least to the extent that a regular IRA contribution is not allowed. Bad mistake – how could the plan administrator allow the transfer?
Permalink Submitted by BruceM on Fri, 2008-12-19 05:57
I agree with Alan. A 457(b) plan with a non-profit organization (such as a hospital) are generally not transferrable at all, because by code, these plans cannot be ‘funded’. The plan will usually spell out how the distributions will be made over the years following the workers separation from service. The only exception to this is if the former employee goes to work for another non-profit organization who have a 457(b) plan and will accept the transfer…and this may be what the former employer was thinking of…and the IRA custodian may have thought it was a 457(b) from a Governement employer, which is transferrable to an IRA.
But as Alan says, you need to get those $$ out of the IRA. And I’m not sure if an unfunded 457(b) can simply reverse the transfer or not, if done by years end. Thats something you’ll need to check on with the plan administrator. But if the original transfer was agent-to-agent, a reversion may be doable.
BruceM
Permalink Submitted by Todd Cour on Fri, 2008-12-19 15:02
How do you go about the reversal. Can the current custodian just send it back in kind like they received it???? With approval of the plan administrator??? Please advise.