ROLLOVERS

[Guest TroyRiley]

The Governmental Plans Answer Book published by Aspen Publishers states that federal law permits rollovers among 401(a), 403(b), 457 plans, and IRAs for any participant who has had a severance from employment with the transferring employer and is performing services for the entity maintaining the receiving plan.

Is that right? Are rollovers only allowed into the accounts of "active" members in the plan? If federal law doesn't permit inactive members from rolling over money into the plan, please provide a cite. Thanks in advance.

[Alf]

Yes. What are "inactive members" (insert Viagra joke here I guess)? It would be legal for a former employee with an account balance to roll additional money into a plan if that is what you are getting at, but it is unlikely that a plan would actually be drafted to permit it.

[Guest TroyRiley]

Inactive employee means a participant in a governmental plan that terminated employment, but still has an account under the plan. According to the Governmental Plans Answer Book, federal law prohibits rollovers into the plan if the participant is no longer in an employee-employer relationship with the entity maintaining the plan. However, I can't find the federal law prohibiting this. You seem to think it is permitted...however, that is contrary to what I'm citing.

[Alf]

You are not really citing anything official. Legally qualifed plans have to be maintained for employees and former employees cannot contribute, so the answer to your question I guess is no they cant. That answer does not depend on whether or not it is a governmental plan.

Is that really an issue? Why didn't they make the rollover when they were employed? Why do they want to rollover a contribtion into an employer sponsored plan instead of trying to get it out asap??

[JDuns]

A plan may allow employees to roll-in money before they meet the age and service requirements for plan participation (although many plans still do not allow roll-ins until the employee becomes a participant for a variety of reasons including plan fees and turnover concerns).

I am not aware of any plan that would allow plan participants to roll-in other benefits after the employment relationship terminated. I would strongly advise an employer against adding such a feature due to the lack of the employment connection at the time of the addition.