457b

[PS]

One of the client is terminating they 401k plan and then will set up a 457b plan, the participants have been given an option to rollover the funds from 401k to 457b plan.  Can participants rollover funds from 401k to 457b? it will be a governmental 457b plan.  

[Peter Gulia]

Federal income tax law does not preclude a governmental § 457(b) plan from accepting a rollover contribution if:

the distributed-from plan is a § 402(c)(8)(B) eligible retirement plan;

the distribution is a § 402(c)(4) eligible rollover distribution;

the governmental § 457(b) plan provides that the plan accepts rollover contributions; and

the § 457(b) plan separately accounts for rollover contributions, including separately accounting for those not from another governmental § 457(b) plan.

See 26 C.F.R. § 1.457-10(e) https://www.ecfr.gov/current/title-26/part-1/section-1.457-10#p-1.457-10(e).

Beyond this, a governmental employer should get its lawyer’s advice about State and other local laws.

This is not advice to anyone.

[John Feldt ERPA CPC QPA]

Must track separately also because, unlike 457(b) distributions, it will generally remain subject to the 10% excise tax if distributed as taxable before age 59.5.