Author Topic: Old 457 Won't Roll into New 457 Plan - Why?  (Read 1861 times)

Wilson Hall

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Old 457 Won't Roll into New 457 Plan - Why?
« on: November 18, 2016, 01:16:47 PM »
Fellow Mustachians, I am stumped. A couple of months ago, I changed jobs from one government organization to another. The company that holds my 457 account has a relationship with both employers, and after a meeting with my plan advisor I was led to believe that my account would be moved over to the new employer, no problem, and all I had to do was fill out new paperwork to start making contributions. Well, I got a call today saying that this wasn't possible after all and I would be stuck with two 457s. I have a meeting set up with the advisor next week to get the full story and to fill out paperwork for the new 457, but I'm beginning to have some doubts. During my career, I have rolled a 457b into a 401k into a 403b without issues; therefore, why would rolling one 457 into another be problematic?

FWIW, I also have the above-referenced 403b from the old job (which I plan to roll into a traditional IRA), a Roth IRA, and a pension I can start taking at 30 years or age 62, so it's not as if I'm without other retirement funds. I opened the 457 a few years ago in order to access some funds before age 59.5 penalty-free, but if there's some weirdness about this type of plan I don't understand, then I sure don't want to open another one. The idea of giving up the tax advantage infuriates me, but none of the employer-sponsored plans I've had access to have been anything to write home about fee-wise. And, I've gotten to the point where I have a hard time trusting any plan advisor out there.

The only "glitch" I know of with this plan is that there's a penalty incurred if you keep the account open less than 5 years, but would that be a reasonable explanation as to why it wouldn't roll over?

tarheeldan

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Re: Old 457 Won't Roll into New 457 Plan - Why?
« Reply #1 on: November 18, 2016, 01:25:14 PM »
I'm no expert, but I did find this:
https://www.irs.gov/pub/irs-tege/rollover_chart.pdf

And the bump might help get someone here who knows what they're talking about.

Wilson Hall

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Re: Old 457 Won't Roll into New 457 Plan - Why?
« Reply #2 on: November 18, 2016, 02:18:55 PM »
I'm no expert, but I did find this:
https://www.irs.gov/pub/irs-tege/rollover_chart.pdf

And the bump might help get someone here who knows what they're talking about.

Thank you, tarheeldan!


Proud Foot

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Re: Old 457 Won't Roll into New 457 Plan - Why?
« Reply #3 on: November 22, 2016, 11:51:23 AM »
Not an expert either and am not familiar with 457's.  I know that 401k/403b's can limit or exclude rollovers into the plan, is it possible your new 457 does the same?

bortman

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Re: Old 457 Won't Roll into New 457 Plan - Why?
« Reply #4 on: November 29, 2016, 10:28:34 AM »
OP, not being snarky, but why would you want to roll your 457b into a new employer's 457b?

One of the benefits of a 457b is that you can withdraw from it once you are no longer employed by the 457b's sponsor, even if you are less than 59.5 yo. You could just leave it with your former employer until you want/need to withdraw from it, no? If you roll it to the new employer's 457b then you won't be able to access the money until you leave your new employer, or reach 59.5

Also, there is no economy of scale here. Moving one 457b's money into another 457b (if the investment options and fees are equal, sounds like they would be in your case) provides no financial benefit. That is, if you have $50k in 457 with A, and $50k in 457 with B, it's the equivalent of $100k in 457 plan B.

Finally, you noted that previously you rolled your 457b into a 401k/403b. I too did this, but before I knew the benefit of pre-59.5 age access to the 457b. It wasn't a lot of money, but I regret that decision now.

This link is a good summary:
https://www.bogleheads.org/wiki/457(b)


I apologize if I've misunderstood your situation, or if I have my facts wrong.
« Last Edit: November 29, 2016, 10:42:42 AM by bortman »

Wilson Hall

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Re: Old 457 Won't Roll into New 457 Plan - Why?
« Reply #5 on: November 29, 2016, 10:55:01 AM »
OP, not being snarky, but why would you want to roll your 457b into a new employer's 457b?

One of the benefits of a 457b is that you can withdraw from it once you are no longer employed by the 457b's sponsor, even if you are less than 59.5 yo. You could just leave it with your former employer until you want/need to withdraw from it, no? If you roll it to the new employer's 457b then you won't be able to access the money until you leave your new employer, or reach 59.5

Also, there is no economy of scale here. Moving one 457b's money into another 457b (if the investment options and fees are equal, sounds like they would be in your case) provides no financial benefit. That is, if you have $50k in 457 with A, and $50k in 457 with B, it's the equivalent of $100k in 457 plan B.

Finally, you noted that previously you rolled your 457b into a 401k/403b. I too did this, but before I knew the benefit of pre-59.5 age access to the 457b. It wasn't a lot of money, but I regret that decision now.

This link is a good summary:
https://www.bogleheads.org/wiki/457(b)


I apologize if I've misunderstood your situation, or if I have my facts wrong.

Bortman, you've got it right. I've decided to open a new 457 and leave the old one alone because, as you pointed out, I can access it before age 59.5. Too bad it has less than $10K in it, but at least I won't owe a penalty when I eventually cash it out.

I was given the option with new employer to open a 403b, 457b, or both. At this time, I can only afford to max out one account, so 457b it is. If raises or promotions in the future allow, I will open a new 403b as well.

Lagom

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Re: Old 457 Won't Roll into New 457 Plan - Why?
« Reply #6 on: November 29, 2016, 11:07:12 AM »
I am going off a half-recalled conversation with HR, but my understanding was that you aren't allowed to roll over a 457 into another 457, although that's no real problem for the reasons already specified. I too have access to a 457 and 403b and I definitely recommend you prioritize the former, but max out both as soon as you can! We are in a uniquely lucky situation to have that option, albeit we're both probably taking lower salaries that we could if we were in the private sector.