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Non-Governmental 457(b) Rollover


Catch22PGM

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An executive left 501(c)(3) Org#1 and now works for 501(c)(3) Org#2.  Both organizations have 457(b) plans and both allow rollovers - into and out of the plans.  Org#1 uses a recordkeeper to maintain assets set-aside for their 457(b) plan.  This executive requested a rollover from the Org#1 plan to the Org#2 plan.  The recordkeeper cut a check to Org#1 so now Org#1 must send a check to the Org#2 plan.

Is there any reporting to the IRS that Org#1 needs to do in regards to the rollover?  I know we would normally tell Org#1 to prepare a W-2 but since this is being rolled-over there is no taxable event.  I haven't had experience with non-governmental 457(b) rollovers and I haven't found guidance anywhere else.

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  • 1 year later...

Can somebody with non-gov 403(b) transfer experience shed light on what, if any requirements are imposed on the transfer amount in the new employer's 457(b) plan.  Do the transferred amounts simply become a separate sub-account or is it ok to combine with new 457(b) amounts?  Do the transferred amounts then just become subject to the new plan's distribution rules?  Thanks.

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May I add an additional question--I've seen a number of situations where a top exec was to get some significant 457(f) benefit and the provisions for that have been included in an employment agreement.  In this current case, one new hire is to get a 457(b) benefit--the tax exempt employer does not currently have an existing 457(b) plan--primarily in order to permit the desired transfer of the new hire's old 457(b) at his former tax exempt employer but to also allow continued 457(b) contributions going forward.  Given that the employer will only be offering the 457(b) benefit to the one employee (at least for now), is that something that could be built into the new individual's employment agreement (like they did with another exec's 457(f) arrangement) or should there be a separate 457(b) plan document in place.  I would think the later but I thought I'd check here before trying to research at all.  Thanks.

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I have never actually transferred balances in this manner, so there may be some further nuance, but you may want to look at 1.457-10(b)(6)(i) and (ii), which deal with the distribution timing (of the receiving plan) and any distribution elections already made (in the transferring plan) before the transfer. But in general the account becomes part of the new plan. On a quick pass, there does not appear to be any legal need to segregate the transferred balances vs. the new contributions.

I don't think there's any way you can shoehorn an entire 457(b) document into an employment agreement like you might with a simple 457(f) agreement. I think you need to have a separate plan document.

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EBECatty,

Thanks very much.  Those were my thoughts as well when asked off the cuff and trying to dissuade them generally from doing all of this--apparently somebody provided them some "verbiage" that they could include in an EA to make this work.  Bizarre but we'll dig into the regs and the old plan if they really are going through with this.

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