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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10149
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Is it possible to close out an employer sponsored 457b plan

Customer Question

is it possible to close out an employer sponsored 457b plan that the employer does not contribute to?
Submitted: 7 months ago.
Category: Tax
Expert:  Lane replied 7 months ago.
Hi, ...I am a CRPS (Chartered Retirement Plans Specialist). I can help here....Are you asking about closing out your ACCOUNT in the plan?...Or are you the employer asking about terminating the plan itself (hard to be sure from your question)...Let me know, and we can go from there...lane......I hold a law degree (JD, Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial, Social Security/Medicare, estate, corporate, both for-profit and non-profit, and tax advice, since 1986
Expert:  Lane replied 7 months ago.
OK, I still don't see you coming back into the chat here:...Assuming this is a government 457(b) (as opposed to a tax-exempt 457(b)), here are the rules for withdrawals...Government 457(b) plans are subject to income tax upon withdrawal but are not subject to the 10% early withdrawal penalty. Funds can be withdrawn at retirement, upon severance from the employer, upon death, upon disability, and under stringent hardship withdrawal rules....Funds must be withdrawn at age 70 and 1/2 (unless you are still working) and are subject to the Required Minimum Distribution rules (1),rules. Different rules apply if you work for a tax-exempt organization (you must see the employer plan document for the details.) ...(1) Retirement Plans FAQs regarding Required Minimum Distributions, IRS
Expert:  Lane replied 7 months ago.
Also, (again assuming you are the employee not the employer), you should know this:...Revenue Ruling 2010-27 contains examples of certain expenses that may be eligible for an unforeseeable emergency distribution from a 457(b) deferred compensation plan. In general, a 457(b) plan may permit hardship distributions for unforeseeable emergencies if specific requirements are met. This new ruling determines that residential flood damage and funeral expenses of a non-dependent child may be unforeseeable emergencies arising from events beyond the control of the participant. However, accumulated credit card debt would not be eligible for an unforeseeable emergency distribution.
Customer: replied 7 months ago.
Sorry sir, I was in another window. I am an employee, still working for a local government. I wanted to close out the account. I have the 401 account automatically.
Customer: replied 7 months ago.
I know I can't close the 401 or withdraw from it. But it was my understanding when I opened the 457 that it was voluntary since the job would not contribute.
Expert:  Lane replied 7 months ago.
OK, don't know if you saw the above, but you MIGHT be able to under the newer "unforseeable emergency" rules, which relax the rules a bit:...You can see all of the here: https://www.irs.gov/Retirement-Plans/Employee-Plans-News-December-17-2010-Unforseeable-Emergency-Distributions-from-457b-Plans...But, so sorry, you can't make withdrawals. unless you can make it fit one of these emergencies...It IS your money, however, no one can take it
Expert:  Lane replied 7 months ago.
Also, you can certainly stop contributing.
Customer: replied 7 months ago.
So I can't close it out completely. I'm only being persistent because I viewed something before about it being a possibility and facing a 20% reduction.
Customer: replied 7 months ago.
Let me also say, thank you. I feel better discussing it with you rather than the robots at the customer service desk for the company.
Expert:  Lane replied 7 months ago.
So sorry, no. This is case where you've been given good information (IRS regs) ...Also you may be able to move the money to a cash equivalent inside the plan...But I would actually NOT recommend you do that. Last year (the first in four years where we didn't have a double digit gain in the market) ended about 6% down ... and this year (as always in a year before an election) will be choppy as well....But time like these are when you want to be buying in. Then as things correct back up 2017-2018, my position is that you'll be glad you did....And i you stop contributing I wouldn't move the money into something liquid NOW, becasue you'll likely be locking in a loss that will likely turn out only to be a loss, on paper
Expert:  Lane replied 7 months ago.
Sorry- Looks like our posts crossed there ... I was responding to your last question ...I'm very glad to help
Expert:  Lane replied 7 months ago.
You COULD be talking about the 20% required withholding tax for distributions from normal qualified plans like 401(k)s ... but even those (not as stringent) must still allow for withdrawals in what's called the plan document...,For 457(b)'s it's simply not allowed ... (think of it as a tradeoff for the fact that there's no 10% early retirement penalty tax - as there IS with 401(k)s)
Expert:  Lane replied 7 months ago.
I hope this has helped....Please let me know if you have any questions at all....If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the faces or stars on your screen, and then clicking “submit That’s the only way JustAnswer will credit us for the work here....Thank you!Lane……I hold a law degree (JD, Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial, Social Security/Medicare, estate, corporate, both for-profit and non-profit, and tax advice, since 1986
Customer: replied 7 months ago.
It has. Thanks!
Expert:  Lane replied 7 months ago.
That's great ... I'd really appreciate your rating me by using those stars on your screen and clicking submit...Otherwise I wont be credited for my work here...ThanksLane

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