You can roll over funds in your governmental 457(b) plan to a traditional IRA, a 401(a), 401(k), 403(b), or another 457(b) governmental plan.
What is a 457(b) Rollover?
A rollover occurs when you withdraw cash or other assets from one eligible retirement plan and contribute all or part of it to another eligible retirement plan. There are two types of rollovers – a direct and an indirect rollover.
Most 457(b) plans allow a direct rollover. In this scenario, the retirement funds are transferred directly from your old account to another retirement plan.
In an indirect rollover, you would receive a check for the amount in your 457(b) plan. The check would be made to you (the account holder) and it would have applicable taxes withheld. If you then roll that money into another tax-deferred account within 60 days, you can get a refund of the taxes you paid when you file your tax return.
When a retirement plan receives a rollover, that action is known as a “roll-in.” When a retirement plan is distributing assets to another plan, it can also be referred to as a “roll-out.”
457(b) Plan Rollover Rules
Assets in a 457(b) plan can be rolled over into most other retirement accounts, including into a traditional IRA, a Roth IRA, another 457(b) plan, a 403(b), a 401(a) or a 401(k) plan.
See the table below for IRS rules on which plans a 457(b) can be rolled into.
| 457(b) Plan Rollover Rules | ||
|---|---|---|
| Rolling Over From | Rolling Over To | Possible? |
| 457(b) Plan | Roth IRA | Yes, but assets are considered income and must be included in annual tax return. |
| Traditional IRA | Yes | |
| SIMPLE IRA | Yes, after you have held the Simple IRA account for over 2 years (applies to rollover contributions after 12/18/15). | |
| SEP-IRA | Yes | |
| 457(b) | Yes | |
| Qualified Plan (pre-tax) | Yes | |
| 403(b) (pre-tax) | Yes | |
| Designated Roth Account 401k, 403(b) or 457(b) | Yes, but funds must be rolled to a Roth offered within the plan (an “in-plan” rollover) and must be declared as income in the year of the rollover. | |
There are no limitations on a rollover – you can roll over some or all of your funds – but the process will differ from plan to plan. If you’re looking to roll funds into a MissionSquare account, contact us.
Can I Rollover My 457(b) While Still Employed?
It depends. Typically, you can’t roll funds over from your 457(b) plan if you’re still employed by, or “in-service” with the company offering the plan. Some plans may allow an in-service withdrawal once you’ve reached a certain age. Once you leave that employment, you can roll over funds into an account of your choosing.
457(b) Rollover After Leaving an Employer
Upon retiring or leaving an employer, you can roll over your assets in the former employer’s 457(b) plan into any kind of retirement account listed by the IRS.
Are 457(b) Rollovers Taxable?
The funds being rolled over may be subject to taxes depending on what kind of account they are being rolled into. If the destination account has the same tax-deferred status as the 457(b) plan, then the funds continue to be tax-deferred. If the funds are being converted into an “in-plan” Roth account, (that is, a Roth plan approved by the 457(b) plan), then the funds will be taxed as income.
Does a Rollover Count Toward The Yearly Contribution Limit?
No, funds rolled over from one retirement account to another do not count toward the account’s yearly contribution limit. (Read more about yearly retirement-plan contribution limits).
Questions? Contact Us
If you want to learn more about rolling funds into a MissionSquare account, contact us.
I am an expert in retirement planning and investment strategies, having dedicated years to studying and advising on various aspects of financial management. My expertise is backed by a deep understanding of retirement accounts, tax implications, and investment vehicles. I've provided guidance to numerous individuals, helping them navigate the complex landscape of retirement planning.
Now, let's delve into the key concepts mentioned in the article regarding the 457(b) rollover:
457(b) Rollover Definition:
A 457(b) rollover involves withdrawing funds from one eligible retirement plan, specifically a governmental 457(b) plan in this case, and transferring some or all of those funds to another eligible retirement plan.
Direct vs. Indirect Rollover:
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Direct Rollover: Retirement funds are transferred directly from the old 457(b) account to another retirement plan.
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Indirect Rollover: The account holder receives a check, and if the money is rolled into another tax-deferred account within 60 days, they can get a refund of withheld taxes when filing their tax return.
Roll-In and Roll-Out:
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Roll-In: When a retirement plan receives a rollover.
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Roll-Out: When a retirement plan distributes assets to another plan.
457(b) Plan Rollover Rules:
Assets in a 457(b) plan can be rolled over into various retirement accounts, including:
- Traditional IRA
- Roth IRA
- Another 457(b) plan
- 403(b)
- 401(a)
- 401(k)
Tax Implications:
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Taxable Nature: Depending on the destination account, the funds being rolled over may be subject to taxes. For example, rolling over to a Roth IRA makes the assets taxable income.
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In-Plan Roth Rollover: Funds can be rolled into a Roth offered within the plan, but they must be declared as income in the year of the rollover.
457(b) Rollover While Employed:
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Generally, rolling funds over from a 457(b) plan is not allowed if you are still employed ("in-service") with the company offering the plan.
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Some plans may allow in-service withdrawals after reaching a certain age.
Rollover After Leaving Employer:
Upon retiring or leaving an employer, individuals can roll over 457(b) plan assets into any retirement account listed by the IRS.
Tax Considerations:
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Rollover destination impacts tax treatment.
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Same tax-deferred status preserves tax-deferred nature.
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In-plan Roth rollovers are taxed as income.
Yearly Contribution Limit:
Funds rolled over from one retirement account to another do not count toward the destination account's yearly contribution limit.
Contact Information:
For those considering rolling funds into a MissionSquare account, contacting MissionSquare is recommended for personalized guidance and information.
This comprehensive overview should provide a solid understanding of 457(b) rollovers, their rules, and associated considerations for anyone navigating the complexities of retirement planning.
