Transfers between Nongovernmental 457(b) Plans

[Guest IRISH79]

I understand that nongovernmental 457(b) plans are not eligible rollover plans. But, is there a way to transfer funds from one nongovernmental 457(b) plan to another nongovernmental 457(b) plan without triggering income tax inclusion?

[John Feldt ERPA CPC QPA]

Yes, a direct transfer is an option, I'll cite the reg.

[John Feldt ERPA CPC QPA]

1.457-10(b)(5):

Requirements for post-severance plan-to-plan transfers among eligible plans of tax-exempt entities. --A transfer under paragraph (b)(1) of this section from an eligible plan of a tax-exempt employer to another eligible plan of a tax-exempt employer is permitted if the following conditions are met --

(i) The transferor plan provides for transfers;

(ii) The receiving plan provides for the receipt of transfers;

(iii) The participant or beneficiary whose amounts deferred are being transferred will have an amount deferred immediately after the transfer at least equal to the amount deferred with respect to that participant or beneficiary immediately before the transfer; and

(iv) In the case of a transfer for a participant, the participant has had a severance from employment with the transferring employer and is performing services for the entity maintaining the receiving plan.

[Guest IRISH79]

Thank you for the cite. with regard to requirement (iii) - amount before and after transfer must be the same- do you know if that means that there could be no surrender charge applied to the participant's account under the transferor plan? The funds are currently held under a variable annuity contract.

[John Feldt ERPA CPC QPA]

I think it does mean that, since it states "the amount deferred". To me that means the total amount in the account that has not been taxed, but upon which taxation has been deferred.

Certainly that's not a legal opinion by any means. I'll be happy to hear what anyone else might want to say on this subject.

[TLGeer]

Setting aside the problems of using a non-realizable value as the accrued benefit, expenses of distributions/ mergers can be borne by the individual's account. Arguably, the hit is such an expense, and routinely it is treated as such.

Tom Geer