457 Rollovers

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457 Rollovers

There is more than one situation for rollovers.

The basic rules

You can generally roll your 457 plan over into another retirement plan or IRA, or another 457. Certain types of 457s are not eligible, however. For these cases, rollovers can occur only into another ineligible 457. That is why it is important to consult with your plan sponsor, as there are many nuances in these plans.

The full amount from the original account must be placed into the new plan within 60 days. If a lesser amount is rolled over, a 20% withholding will apply.

Direct rollovers

You can move the funds via a direct rollover (trustee-to-trustee transfer), in which the funds are transferred from the old custodian to a new one without you touching them. This is usually the smoothest method because it doesn’t incur tax penalties or withholding by the IRS.

Self-directed rollovers

You can also remove the money from the old account and put it into the new account yourself. However, with this method, the IRS requires that 20% of the funds be withheld for tax purposes, even if you intend to roll the money over to a new plan. You will then have to deposit the full rollover amount in order to avoid an early withdrawal penalty. This means you will need to come up with an amount equal to the 20% that was withheld. Once you have done so, however, the withheld 20% will be returned to you if you apply for a refund.