Rollover to IRA from 457 of 401(c)3 organization

[Guest adevito]

I have received an opinion that states that rollovers from 457 to IRAs are not permitted if the 457 is established by a non-profit (charitable) organization. I would appreciate any confirmation or rejection of that opinion.

[MGB]

That is not an opinion, it is the law. EGTRRA only extended rollover provisions to governmental 457 plans, not 457 plans of tax-exempt entities. See section 641 of EGTRRA adding section 457(e)(16) to the Code. In (A), it only references an "employer described in subsection (e)(1)(A)," which is governmental employers.

The theoretical reasoning is that governmental plans have a trust, whereas nonprofit plans do not and rollover rules are dual-directional, meaning that nonprofit plans cannot accept rollovers (nowhere to put them) and therefore cannot have them going in the opposite direction either. The more practical reasoning why this result occurred is that governmental employers have better connected (and louder) lobbying groups than nonprofit employers.

[mbozek]

While accounts under a non profit 457 plan cannot be rolled over to an IRA, they can be transferred tax free to another 457(B) plan. IRC 457(e)(10). The reason for the distinction between np and govt 457 plans is that for many govt employers, the 457 plan is the employer sponsored retirement plan for all employees not just members of a select group or HCEs which is a restriction for NP plans.

[Guest adevito]

I like the suggestion to transfer the 457 to another 457 plan. From a practical point of view is there any way to do this unless the person with the 457 gets a job with a governmental entity offering a 457 plan? To the best of my knowledge, you can't turn to a mutual fund company or brokerage company and say you want to open a 457 account and transfer your 457 account into it.

[mbozek]

the employee whould have to become a participant in the govt 457 plan.