Roth 457(b)

[joel]

The 10 percent penalty tax/age 59 1/2 rule does not apply to withdrawals made from a pre-tax 457(b) Plan. Does the rule apply to a Roth 457(b) account?

[30Rock]

The rule does not apply to 457(b) contributions. However, it would apply to rollovers made to the 457b plan from plans other than another 457b plan - i.e. rollovers from a 401k, 403b, 401a plan.

[joel]

The rule does not apply to 457(b) contributions. However, it would apply to rollovers made to the 457b plan from plans other than another 457b plan - i.e. rollovers from a 401k, 403b, 401a plan.

Did you forget to write "Roth" before "457(b) contributions" in your first sentence? I just want to fully understand your position?

Thanks,

Joel

[joel]

I would like to rephrase my question: A Roth 457(b) participant closes out his account. He withdraws his entire $5000 balance. The account has existed for less than 5 years so the gains of $1000 is taxable at ordinary rates. Is the $1000 also subject to the 10 percent penalty tax?

[joel]

The rule does not apply to 457(b) contributions. However, it would apply to rollovers made to the 457b plan from plans other than another 457b plan - i.e. rollovers from a 401k, 403b, 401a plan.

30 Rock:

Thank you for your response. However you misinterpreted my question so your response is not on point.

Here is the answer to my orginal question:

Firstly, only gains on the Roth investment are taxable. Income tax and the 10 percent penalty tax would be due on the withdrawal of gains provided those gains are not a qualified distribution; i.e., were not in the Roth 457(b) account for the later of at least 5 years or the attainment of age 59-1/2.

[dwise401k]

The rule does not apply to 457(b) contributions. However, it would apply to rollovers made to the 457b plan from plans other than another 457b plan - i.e. rollovers from a 401k, 403b, 401a plan.

30 Rock:

Thank you for your response. However you misinterpreted my question so your response is not on point.

Here is the answer to my orginal question:

Firstly, only gains on the Roth investment are taxable. Income tax and the 10 percent penalty tax would be due on the withdrawal of gains provided those gains are not a qualified distribution; i.e., were not in the Roth 457(b) account for the later of at least 5 years or the attainment of age 59-1/2.

[dwise401k]

I suggest you continue to research the 10% penalty issue on pre-59 1/2 Roth earnings distributions from a 457(b) plan. In a NAGDCA webex last week, an IRS spokeswoman said that they do not apply because they are from a 457(b) plan.

[mbozek]

I suggest you continue to research the 10% penalty issue on pre-59 1/2 Roth earnings distributions from a 457(b) plan. In a NAGDCA webex last week, an IRS spokeswoman said that they do not apply because they are from a 457(b) plan.

According to Pub 575, P 31 the 10% tax on distributions before 59 1/2 only applies to an eligible state or local government 457 plan to the extent that any distribution is attributable to amounts the plan received in a direct transfer or rollover from other retirement plans or an IRA.