What happens to money in a 457 after leaving?

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czeckers
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What happens to money in a 457 after leaving?

Post by czeckers » Sun Oct 23, 2011 8:18 pm

I have a 457 account with a nonprofit university. I've been told by some colleagues that when they left, the University did not allow them to transfer their funds. Their stated reason was that technically the funds belong to the university and not to the individual. Though I know this to be true if the University were to file for bankruptcy, I always figured one would be able to transfer the funds to an IRA after leaving. Does any one know if they in fact have the legal right to refuse transfer? I'd like to add that there is no employer contribution to these accounts.
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sportal
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Re: What happens to money in a 457 after leaving?

Post by sportal » Sun Oct 23, 2011 8:36 pm

457 = Deferred Compensation. The money is still owned by the employer unlike a 401k which is owned by the employee.

You elected into employer risk, by selecting the 457 plan. After you leave, the money is still owned by the employer, until dispersed to you. You accept the risk of the employer insolvency, in return for the tax deferment benefit.

Rollovers are based upon the 457 plan terms.
Last edited by sportal on Sun Oct 23, 2011 8:43 pm, edited 1 time in total.

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Peter Foley
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Re: What happens to money in a 457 after leaving?

Post by Peter Foley » Sun Oct 23, 2011 8:38 pm

I too have a 457. You can withdraw your 457 upon separation from the employer. Perhaps the difficulty was with the transfer. You can certainly move the money to an IRA.

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jeffyscott
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Re: What happens to money in a 457 after leaving?

Post by jeffyscott » Sun Oct 23, 2011 9:41 pm

Apparently there are differences between government and non-government 457 plan rules.

http://www.457bwise.com/faqs/index.html
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Re: What happens to money in a 457 after leaving?

Post by letsgobobby » Mon Oct 24, 2011 12:56 am

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BruceM
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Re: What happens to money in a 457 after leaving?

Post by BruceM » Mon Oct 24, 2011 6:12 pm

Yes, this is a major drawback of NP 457(b) (eligible) and 457(f) (ineligible) plans. As mentioned previously, these plan balances belong to the employer, not to you, even though all contributions to the plan were made from your salary over the years. The employer has a contract with you, that per the plan document, distributions will begin at age X, and distributions will be Y% per year, although the plan could be written to allow a lump sum distribution a certain age. Changes to this will usually only be allowed with unforseeable emergencies, death or disability.

But in no case are these plans allowed to roll over their balances to anything but another non-profit 457 plan, assuming both plans allow for this. Also, there are special rules for distributions that occur within a specified period of dissolution of the NP organization or the filing for chapter 11 or chapter 7 bankruptcy.

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Re: What happens to money in a 457 after leaving?

Post by Ruprecht » Mon Oct 24, 2011 6:56 pm

BruceM wrote:Yes, this is a major drawback of NP 457(b) (eligible) and 457(f) (ineligible) plans. As mentioned previously, these plan balances belong to the employer, not to you, even though all contributions to the plan were made from your salary over the years. The employer has a contract with you, that per the plan document, distributions will begin at age X, and distributions will be Y% per year, although the plan could be written to allow a lump sum distribution a certain age. Changes to this will usually only be allowed with unforseeable emergencies, death or disability.

But in no case are these plans allowed to roll over their balances to anything but another non-profit 457 plan, assuming both plans allow for this. Also, there are special rules for distributions that occur within a specified period of dissolution of the NP organization or the filing for chapter 11 or chapter 7 bankruptcy.

BruceM
"assuming both plans allow for this" is an important phrase. Some plans do not allow rollovers, even to another non-profit 457 plan. I guess it's not a huge deal - the money will still be yours eventually, but it's kind of annoying to know that you have money locked into an employer you no longer work for.

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Re: What happens to money in a 457 after leaving?

Post by ricqas1324 » Fri Apr 12, 2019 11:19 pm

Hello

If you work someplace for a year or less and you have a 457b is there any advantage to this at all? If you leave employment where can you put the money if you cannot roll it over other than distribute back to yourself?

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Re: What happens to money in a 457 after leaving?

Post by NYCwriter » Fri Apr 12, 2019 11:56 pm

As others have noted, some (governmental) 457(b) plans allow withdrawals before age 59-1/2 without penalty, some with a penalty, plus tax. But others are limited to hardship withdrawals with stringent requirements, although many allow for a transfer upon separation.

For long-term or late (pre-retirement) employment, 457b still offers advantages. The post-50 and 3-year catch-up pre-retirement, and the ability to contribute to both a 403b and 457b--not exceeding 100% of pay. But especially with the non-g 457bs, it depends on the plan. For short-term employment, or those who want flexibility, it makes sense to prioritize other retirement options.

Other than the fee+percentage (paying the devil his due) I've been happy with my NYS 457b. It's better managed and more flexible than the 403b, though I contribute to both. NYS also allows a tax deduction for withdrawals after 59-1/2 up to a certain amount for those living in NY.

But it really is YMMV.
Last edited by NYCwriter on Sat Apr 13, 2019 12:12 am, edited 1 time in total.

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Re: What happens to money in a 457 after leaving?

Post by NYCwriter » Sat Apr 13, 2019 12:07 am

ricqas1324 wrote:
Fri Apr 12, 2019 11:19 pm
Hello

If you work someplace for a year or less and you have a 457b is there any advantage to this at all? If you leave employment where can you put the money if you cannot roll it over other than distribute back to yourself?
For expected short-term employment for people younger than 50, I don't think it makes much sense. Maybe if you have significant excess from other retirement options, and withdrawal is an option. Some plans that allow withdrawal have a penalty. Unless tax deferral is a must, you'd be better off funding a Roth.

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Re: What happens to money in a 457 after leaving?

Post by jeffyscott » Sat Apr 13, 2019 6:48 am

ricqas1324 wrote:
Fri Apr 12, 2019 11:19 pm
Hello

If you work someplace for a year or less and you have a 457b is there any advantage to this at all? If you leave employment where can you put the money if you cannot roll it over other than distribute back to yourself?
I believe all Government 457s can be rolled to an IRA. It's only the non-government ones that are more restricted, as I understand it.

I rolled most of my government 457 to an IRA after retirement. Left some behind, temporarily, due to the ability to withdraw prior to age 59.5.
press on, regardless - John C. Bogle

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Re: What happens to money in a 457 after leaving?

Post by fourwheelcycle » Sat Apr 13, 2019 10:59 am

My NP non-gov employer offered a 457(f). Fortunately it was invested in Vanguard's 500 index. The custodian was not a big national company like Fidelity or TIAA, and my employer paid all the fees, so no admin or expense fees were charged to my account. I let it ride for eight years and then took it out all at one time during a year when our other income was down a bit.

My wife, through her NP non-gov employer, has a larger balance 457(b) held at Fidelity. I asked her employer about rolling it out to Vanguard when she retires. The answer is no - it must stay at Fidelity until she withdraws it, through RMDs or otherwise.

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Re: What happens to money in a 457 after leaving?

Post by retire2022 » Sat Apr 13, 2019 10:59 pm

Op see Chart for Designated Roth Account (401(k), 403(b), or 457(b) to options listed also please note Governmental 457(b) Plan has it own column

IRS Publication 590a pdf page 22 to and from

https://www.irs.gov/pub/irs-pdf/p590a.pdf

More on non-government 457b

https://www.irs.gov/retirement-plans/no ... tion-plans

comparison between tax exempt 457b and governmental 457b

https://www.irs.gov/retirement-plans/co ... 457b-plans

bogleheads wiki on 457b

https://www.bogleheads.org/wiki/457(b)

Key characteristics and common mistakes with Tax Exempt 457b plans

https://www.irs.gov/retirement-plans/ta ... n-mistakes

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Re: What happens to money in a 457 after leaving?

Post by Clever_Username » Sun Apr 14, 2019 8:20 am

Huh, this thread is telling me I have been picturing governmental 457s incorrectly. I viewed it like a 403(b), except when you leave employment, you can take distributions (at your convenience, whenever you want for the amount you want) without the pre-59.5 penalty. It looks like this is not the case? I may have advised a friend incorrectly about hers. :confused
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Re: What happens to money in a 457 after leaving?

Post by jeffyscott » Sun Apr 14, 2019 9:56 am

Clever_Username wrote:
Sun Apr 14, 2019 8:20 am
Huh, this thread is telling me I have been picturing governmental 457s incorrectly. I viewed it like a 403(b), except when you leave employment, you can take distributions (at your convenience, whenever you want for the amount you want) without the pre-59.5 penalty. It looks like this is not the case? I may have advised a friend incorrectly about hers. :confused
No, you were correct for government 457. It's non-government ones that are more restricted.
press on, regardless - John C. Bogle

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Re: What happens to money in a 457 after leaving?

Post by Clever_Username » Sun Apr 14, 2019 10:02 am

jeffyscott wrote:
Sun Apr 14, 2019 9:56 am
Clever_Username wrote:
Sun Apr 14, 2019 8:20 am
Huh, this thread is telling me I have been picturing governmental 457s incorrectly. I viewed it like a 403(b), except when you leave employment, you can take distributions (at your convenience, whenever you want for the amount you want) without the pre-59.5 penalty. It looks like this is not the case? I may have advised a friend incorrectly about hers. :confused
No, you were correct for government 457. It's non-government ones that are more restricted.
Oh good. Because I told my friend to think of it like a 401(k) will work upon retirement, except without the age restriction. Thank you!
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Re: What happens to money in a 457 after leaving?

Post by willthrill81 » Sun Apr 14, 2019 10:03 am

jeffyscott wrote:
Sat Apr 13, 2019 6:48 am
I rolled most of my government 457 to an IRA after retirement. Left some behind, temporarily, due to the ability to withdraw prior to age 59.5.
My plans are similar. Starting next year, I plan to max out my 457 over my 401k in order to provide plenty of runway for retirement from 55 to 59.5. By the time I reach 59.5, I'll rollover the remaining balance to an IRA.
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Re: What happens to money in a 457 after leaving?

Post by alrick » Sun Apr 14, 2019 10:12 am

my experience is the same as Jeffreyscott. I was able to move my public (public college) 457(b) to my rollover IRA. I was not able to do this with my non-public (private university) 457(b), so I have held that and simply take my annual RMDs from it......and it will pass along as an inherited 457(b) to my beneficiaries.....when I pass along.

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Re: What happens to money in a 457 after leaving?

Post by retire2022 » Sun Apr 14, 2019 11:28 am

jeffyscott wrote:
Sun Oct 23, 2011 9:41 pm
Apparently there are differences between government and non-government 457 plan rules.

http://www.457bwise.com/faqs/index.html
Jeffyscott your link is broken:

Not Found

The requested URL /faqs/index.html was not found on this server.
Apache Server at www.457bwise.com Port 80


Op your 457b plan is Tax Exempt correct? that is my read on the not-for-profit statement, I purposely posted the links as a clarifer.
czeckers wrote:
Sun Oct 23, 2011 8:18 pm
I have a 457 account with a nonprofit university.

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Re: What happens to money in a 457 after leaving?

Post by jeffyscott » Sun Apr 14, 2019 1:19 pm

That post and link are from 2011 :)
press on, regardless - John C. Bogle

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Re: What happens to money in a 457 after leaving?

Post by retire2022 » Sun Apr 14, 2019 6:07 pm

jeffyscott wrote:
Sun Apr 14, 2019 1:19 pm
That post and link are from 2011 :)
Yes I guess our hearts are in the right place, need reading glasses next time I post.

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Re: What happens to money in a 457 after leaving?

Post by acegolfer » Wed Apr 24, 2019 9:39 am

As others said, they differ from university to university. I also have 457b at a nonprofit university. I contacted HR and asked about the terms of my 457(b) contract.

upon termination, in my contract, I have 3 options:
1. installment pmt
2. lumpsum pmt
3. annuity pmt

There's no option to rollover to IRA.

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Re: What happens to money in a 457 after leaving?

Post by Clever_Username » Wed Apr 24, 2019 9:48 am

acegolfer wrote:
Wed Apr 24, 2019 9:39 am
As others said, they differ from university to university. I also have 457b at a nonprofit university. I contacted HR and asked about the terms of my 457(b) contract.

upon termination, in my contract, I have 3 options:
1. installment pmt
2. lumpsum pmt
3. annuity pmt

There's no option to rollover to IRA.
Is your non-profit university government or not? I guess I'm really asking if your 457 is a governmental 457 or non-governmental 457.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.

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Re: What happens to money in a 457 after leaving?

Post by acegolfer » Wed Apr 24, 2019 9:49 am

Clever_Username wrote:
Wed Apr 24, 2019 9:48 am
acegolfer wrote:
Wed Apr 24, 2019 9:39 am
As others said, they differ from university to university. I also have 457b at a nonprofit university. I contacted HR and asked about the terms of my 457(b) contract.

upon termination, in my contract, I have 3 options:
1. installment pmt
2. lumpsum pmt
3. annuity pmt

There's no option to rollover to IRA.
Is your non-profit university government or not? I guess I'm really asking if your 457 is a governmental 457 or non-governmental 457.
Sorry forgot to mention it. It's non-governmental.

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