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Richard Parker

Annuities In A Nongovernmental 457(b) - Distributions?

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It would have been so nice if the government differentiated the two 457(b)'s with an NP or G, but no....

 

My understanding of a nonprofit 457(b) is that employee is required to take full distribution within 60 days of termination of employment. If employee doesn't, there are penalties to the employer. Is this just a provision in a TIAA-CREF NONGOVERNMENTAL 457(b) or is it law? What if your 457(b) is all in annuities - does that prevent a full cash-out? Have a great day.

 

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The terms of the written document for the 457(b) plan will answer this - it can vary from plan to plan.

 

For example, the plan document may say, "an election to delay distribution must be made within 90 days after separation from employment." It could say 60 days, 6 months, 4 months, etc. - usually the designer of the plan tried to give the separated employee enough time to delay the taxation of the account, but not so much time that they are overburdened if they really need those funds soon. 60 days to 90 days seems fairly common.

 

For a nonprofit 457(b), if you do not make a written election to delay the distribution to a later date by the election deadline imposed by the plan document (assuming the plan document allows you to make such an election), then your 457(b) account becomes taxable as W-2 income (regardless of whether or not you receive the funds on that date).

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