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Going from a 401(k) to 457: How does that work?


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#1 GoGoLucky

GoGoLucky

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Posted 27 April 2007 - 04:46 PM

might be taking work with a governmental agencey

they put a % of your base salary (pre tax) into a deferred comp program 457 or 401a

now i have some money in my 401K from my previous employer...

can i transfer that to the 457? can i leave it were it is? what are the benefits?

what happens if i leave the government agencie...do i still get to move the money??? tax pentalties????

enlighten me thx

#2 J Simmons

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Posted 13 May 2007 - 09:38 AM

Can you transfer for 401k $ into your new governmental employer's 457b? Yes, if the 457b is willing to accept and will keep a separate accounting of the 401k $ rolled into the 457b. http://www.irs.gov/p...lover_chart.pdf

Can you leave the 401k $ where they are? If you have more than $5,000 in vested benefits in the 401k, you should have the right to leave it where it is until you reach the later of that 401k's normal retirement age (or age 62, if later). If you have more than $1,000 but not more than $5,000 in vested benefits in the 401k, then whether you can leave it there depends on what the 401k provides. $1,000 or under in vested benefits, the 401k can pay it out to you even if you do not want it.

If you roll the 401k $ into the 457b, your ability to access the 401k $ might be subject to restrictions, even if nothing more than procedural ones, that apply to payouts from the 457b.

The IRS chart shows what other plans or accounts you might be able to roll over benefits from the 457b.

Tax penalties? If you withdraw (i.e., don't rollover) before age 59 1/2, in addition to any income taxes due, you will have a 10% early distribution penalty. If the 401k benefits are Roth, then you would likely face taxation on the earnings since the account hasn't been around for 5 years yet.
John Simmons
jsimmons@ida.net


Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.