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 56 year old client had previously rolled over his IRA into his governmental Section 457(b) deferred compensation plan.  Will he be able to access the money prior to age 59 ½, and will the amounts be subject to a 10% penalty tax?

Answer: Rollover amounts to a 457(b) plan are available to the participant prior to age 59 ½.  In-service distribution rules for 457 accounts do not apply to amounts rolled over to such accounts.

Normal distributions from a Section 457(b) account are not subject to the 10% early distribution penalty.  However, Revenue Code Section 72(t) specifically says that amounts rolled into 457 plans are still subject to the premature distribution penalty.

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