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457b To Ira

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Guest Sierra

Can you advise how I can roll my 457b into an IRA? I am employed by the City of Jacksonville (Fl.) and I was told that the only way I could move my money out of the current plan is if the contract expires with the current company and a new contract is signed with another. Please offer any assistance that you can. Thank you.

 

Who told you what you quoted? Under federal tax law you are entitled to a distribution only unpon severance of employment. Even upon attaining age 59-1/2 you are not entitled to an in-service distribution. You must sever employment. At that time you can effectuate a direct rollover distribution and contribution to the IRA of your choice.

 

Joel

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Sounds to me like the problem is the underlying investment, not the 457(b) rules. My guess would be that the plan is invested in a group annuity contract of some sort, and that your employer does not believe the money can be taken out of the GAC. There are two possible solutions.

 

First, it is entirely possible that the contract does, in fact, allow the payment. Most GACs are "benefits sensitive." This means that the insurer, believing it will get more money in the future for other employees, permits payouts where distributions are allowed under the terms of the plan. The GAC may also allow payouts up to some limit (e.g., 10% of assets or amounts held in a specific investment). It is also possible that a withdrawal is permitted on payment of a penalty or contingent deferred sales charge.

 

Second, if the city wants to, it can finesse the problem. It is possible to (1) set up a trust under the plan, (2) divert money that would ordinarily be paid to the insurer to the trust until the amount in the trust is the amount of your benefit, (3) tell the insurer to move the money held f/b/o you to other participants using their new money investment allocations, and (4) pay you the amounts in the trust.

 

Of course, all of this is in the abstract, because we do not know enough about you, your situation, the terms of the plan or the terms of the (likely) GAC.

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