457 & 401(a) Plans

[debbiebaze]

We have a public school that has a 457 plan paired with a 401(a) plan. They are asking if the 2 plans can be merged together. Is this permissible?

[Carol V. Calhoun]

No. A 457(b) plan and a 401(a) plan cannot be merged.

The only way money from a 457(b) can be moved to a 401(a) plan, or vice versa, is if the employees are permitted to take their distributions in cash, and instead choose to have their money rolled over to the new plan. The IRS says:

A [457(b) plan] plan may contain provisions permitting plan termination whereupon amounts can be distributed without violating the distribution restrictions under IRC 457 and Treas. Reg. 1.457-10(a)(2)(ii).

Thus, an employee could get a distribution from the 457(b) plan which the employee could roll over to the 401(a) plan, but no direct merger would be possible.

[debbiebaze]

Thank you!