Can you roll a 401k into a 457 and avoid 10% early withdrawal penalty?

Submitted by Jack Thomas on Thu, 2015-09-24 16:47

Employee has 401k and 457 at same employer. Can employee roll 401k into 457, retire prior to age 59 1/2 and avoid the 10% penalty on distributions on the 401k?



Submitted by David Mertz on Thu, 2015-09-24 16:54

  • No.  Amounts rolled to a 457(b) from a non-457(b) plan must be tracked separately by the 457(b).  Any distributions from this separately tracked amount are subject to early-distribution penalty.  https://www.law.cornell.edu/uscode/text/26/72#t_9:
  • “Special rule for rollovers to section 457 plans. For purposes of this subsection, a distribution from an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A) shall be treated as a distribution from a qualified retirement plan described in 4974(c)(1) to the extent that such distribution is attributable to an amount transferred to an eligible deferred compensation plan from a qualified retirement plan (as defined in section 4974(c)).”

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