Borrow from my 457

[Guest jleanes]

I am a fairfax county employee and have requested to borrow against my 457 for a downpayment on a first time purchase of a home. Is there any way that you know of that I can have access to my money and pay it back over time?:confused:

[Guest Tom Geer]

This is an interesting question.

The SBJPA is the law that required that governmental 457 plans put their money in a trust, and the Conference Report on SBJPA syas specifically that loans from governmental 457 plans are allowed, under the same rules (72(p)) that apply to qualified plans. Section 72(p)(4)(A)(ii)(I) and (p)(4)(B) also have language allowing loans from overnmental 457s.I am of the view that 457s always could make loans, so I view this as a cutback, but it definitely adds certainty even if it decreases the lendable amount to half the vested balance up to $50,000.

However, no 457 plan is required to offer loans. Many don't either because they don't want to deal with the complexity of administering plan loans, because the assets of the plan are invested in can't be borrowed from, or because they are unsure what happens when a loan is not repaid. (The plan loan regs don't specifically say that a default doesn't disqualify the governmental 457, which makes a lot of people nervous, although it seems pretty obvious to me that it does not blow up the plan and just makes the employee immediately taxable on the loan.)

[Guest Tom Geer]

Apologies. The short asnwer is that the plan could allow loans, but does not have to. So, you need to contact the plan administrator and ask (1) do they allow loans, and, if not, (2) why not.

Let us know what whey say.

[Guest jleanes]

Thank You for responding so quickly. I live in Burke, Virginia. According to Fairfax County Government Employee Representive Paul Brown, I am not able to borrrow from my 457. The only way I am able to borrow according to him is for hardship purposes. He does not consider a down payment for a home loan a hardship. Is there anyway around this?

Thanks again Judy

[Guest Tom Geer]

It's a matter of the county's HR policy. They could allow loans on a broader basis, but have chosen not to do so.

[Guest king82@aol.com]

Regarding the conversation of borrowing from your 457, what would normally be considered a "hardship" situation to most plans? I work for a City and I have a 457 plan.