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murphlg

In Service Rollover

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While still working in a governmental agency and contributing to my 457 plan, can I roll my accumulated 457 savings into an IRA Rollover account to take advantage of better investments not offered in my current plan?

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Hi Murphig-

 

Caveat: This is my personal opinion and I am not a tax attorney.

 

I make the assumptions that you are not disabled, less than 59 and 1/2 years old, still working in public service, and have not experienced an unforeseen severe financial hardship.

 

Short answer: No

 

I visited the IRS web site at url:

 

http://www.irs.gov/retirement/article/0,,id=96315,00.html

 

and reviewed House report 107-84, ECONOMIC GROWTH AND TAX RELIEF

RECONCILIATION ACT OF 2001 CONFERENCE REPORT TO ACCOMPANY H.R. 1836 (the EGTRRA conference report).

 

From page 249 of that document:

 

Section 457 benefits can be transferred to another section 457

plan. Distributions from a section 457 plan cannot be rolled over

to another section 457 plan, a qualified plan, a section 403(b) annuity,

or an IRA.

 

However on page 251 of the same document:

 

The House bill provides that employee after-tax contributions

may be rolled over into another qualified plan or a traditional IRA.

 

Furthermore on page 256 of the same document:

 

Elective deferrals under a qualified cash or deferred arrangement

(‘‘section 401(k) plan’’), tax-sheltered annuity (‘‘section 403(b)

annuity’’), or an eligible deferred compensation plan of a tax-exempt

organization or State or local government (‘‘section 457

plan’’), may not be distributable prior to the occurrence of one or

more specified events. These permissible distributable events include

‘‘separation from service.’’

 

You may buy extra years of service in your pension plan from your 457 money. See page 260:

 

A participant in a State or local governmental plan is not required

to include in gross income a direct trustee-to-trustee transfer

to a governmental defined benefit plan from a section 403(b) annuity

or a section 457 plan if the transferred amount is used (1)

to purchase permissive service credits under the plan, or (2) to

repay contributions and earnings with respect to an amount previously

refunded under a forfeiture of service credit under the plan

(or another plan maintained by a State or local government employer

within the same State).

Effective date.—The House bill is effective for transfers after

December 31, 2001

 

I invite others to comment if I have navigated these dangerous waters of Congressional Report language incorrectly.

 

Best wishes,

 

Readingteacherspouse

 

 

 

 

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