disability retirement in a governmental 457(b) plan?

[Guest cbclark]

We are having a bit of an issue. The model Corbel 457(b) basic plan document and its adoption agreement do not provide for disability retirement. Are we missing something or is that not an option under a governemental 457(b) plan? The employer wants to sponsor a new 457(b) and a new 401(a) plan so we are trying to mirror as many provisions as possible for ease of administration. Any thoughts appreciated!

[John Feldt ERPA CPC QPA]

If you want an in-service distribution option for disability in a government-sponsored 457(b) plan, perhaps the plan can allow for an unforseeable emergency withdrawal: "Sudden and unexpected illness of participant, spouse, dependent, or beneficiary"

Otherwise, in-service distribution options are very limited. Distributions from a 457(b) plan are only allowed for:

• severance from employment
  
• attainment of age 70.5
  
• a one-time de-minimis exception
  
• unforseeable emergency
  
• plan termination
  

A government 457(b) plan can allow for loans, but that's probably not what you're looking for either.

[Guest cbclark]

Thanks. I had pointed all these out to the powers that be and there was still some resistance to the idea that there would be no "disability retirement"...I think we are all square, exactly as you have noted, and I am just going to ignore all the teeth gnashing about how the plans aren't going to be mirror images (well DUH given that they are governed by very different code provisions...). The severance from employment trigger covers it all I think.

[joel]

Thanks. I had pointed all these out to the powers that be and there was still some resistance to the idea that there would be no "disability retirement"...I think we are all square, exactly as you have noted, and I am just going to ignore all the teeth gnashing about how the plans aren't going to be mirror images (well DUH given that they are governed by very different code provisions...). The severance from employment trigger covers it all I think.

Don't you need to sever employment in order to qualify for disability retirement?

[ETA Consulting LLC]

Don't you need to sever employment in order to qualify for disability retirement?

Good point. Once you're severed from employment, it doesn't matter whether it's for disability, retirement, or disability retirement. You're still severed and, therefore, eligible for distribution without any 10% early withdrawal penalty (regardless of the age).

[Guest cbclark]

Severance would be necessary for disability retirement even in a regular plan. The issue got raised because of the vesting issue with employer money; one vests 100% if one retires under a disability regardless of age. There is no employer money in this particular 457(b) to begin with; it was a tempest in a teapot. Thanks for your replies.