New Internal Revenue Code

[joel]

Participants in government 457(b) plans must sever employment before they can make withdrawals from their accounts.  

Q.:  Does the soon-to-be new law allow for in-service withdrawals upon attainment of age 59.5?

[Carol V. Calhoun]

No.  That was in one of the previous versions, but not in the final version.

There is also a trap for the unwary in the new law.  While 457(b) plans of governmental employers don't count as remuneration for purposes of the new excise tax on excess compensation, 457(b) plans of private employers do.  And it appears that it counts when it comes out of the plan, not when it goes in.  So the guy who has been putting aside money in a 457(b) plan for decades, but who becomes a covered employee, may discover that a distribution from the 457(b) triggers the excise tax.  People will have to be a lot more careful about when they take out 457(b) money.