Advanced Underwriting Consultants

Ask the Expert – September 5, 2014

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers. Here’s the question of the day.

Question: My client is retiring this year and he has a nongovernmental 457(b) plan that he would like to roll over to an IRA. Is this possible?

Answer: No, nongovernmental Section 457(b) plans (also referred to as “Top Hat” plans) are not eligible for rollover treatment to other types of retirement plans.

A Section 457(b) plan is a deferred compensation plan available for certain state and local governments and nongovernmental, tax-exempt entities. Governmental 457(b) plans are eligible for rollover into other retirement accounts like IRAs, qualified plans and 403(b) annuities. This leads many to mistakenly believe that all 457(b) plans are eligible for rollover.

When a nongovernmental 457(b) participant retires, he should consult with the plan documents to see what his options are. The participant’s options can range from cashing the account out completely, annuitizing, installment distributions, and deferring distributions until a predetermined age but not later than age 70.5.

Have a question for the professionals at AUC? Feel welcome to submit it by email. We may post your question and the answer as the question of the day.