Rollover of deferred compensation

Nov 01, 2008 4 Replies
S

Is there any possibility to rollover normal distributions from a (non-governmental) deferred compensation plan into an IRA or other qualified plan?



In researching this, I see lots of references to doing this rollover when the plan is held at a federal, state, or municipal employer, but nothing on the case of private employer plans.



I am not sure exactly what sort of deferred comp plan it is -- perhaps 409(a). (Tangential question, Section 457 plans are limited to government employers, or is that not the case?)



Thanks,



Steve



========================================= MODERATOR'S COMMENT: It would help to know exactly what type of plan this is. Also what is the nature of the distribution?


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A

No. You have a nonqualified plan. The only plans that can be rolled over to an IRA are qualified plans (pension, profit-sharing & stock bonus), annuity plans, 403(b) plans and governmental 457 plans.

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S

Thanks, that is what I have assumed.

So ... is their any logic behind governmental employees getting a break on this? (I realize tax laws are not based on logic.)

Steve

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A

It's not just state & local gov't. It also includes tax-exempts other than churches.

Since the passage of EGTRRA 2001, governmental employees certainly have more ability to shelter income from taxes and grow savings tax-free. That act, dropped the combined contribution limit of 457 plans with other defined contribution plans. Since then, an eligible employer can offer a 401(k) or a 403(b) AND a

457 plan. The employee can contribute the maximum to both plans. In 2009, that could be $33,000 plus another $11,000 in catchup contributions if age 50. An employee with a private company in a 401(k) could only contribute half those amounts.

There are some other goodies buried inside some 457 plans for governmental employees. I am almost sure that there is some additional catchup provision when you get within 3 years of retirement.

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H

Public 457s have a great catchup. Providing the participant qualifies, he/she can contribution an additional $15500 until they have "caught up". That goes to $16000 in 09.

-HW "Skip" Weldon Columbia, SC

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