Tax Facts

3597 / Are rollover distributions permitted in the context of Section 457(b) “eligible” nonqualified deferred compensation plans?

Yes. Distributions may be rolled over to and from eligible Section 457(b) plans of governmental employers under rules similar to those for qualified retirement plans and tax-sheltered annuities.1 If an eligible Section 457(b) plan of a governmental employer receives a rollover from a qualified retirement plan or a TSA, it must separately account for such rollover amounts thereafter.2


The following rules applicable to rollovers from qualified retirement plans ( Q 3998) are also applicable to rollovers to and from eligible Section 457(b) plans of governmental employers:
(1)   Maximum amount of rollover

(2)   60-day limitation

(3)   Definition of eligible rollover distribution

(4)   Sales of distributed property

(5)   Frozen deposits

(6)   Surviving spouse rollovers

(7)   For distributions after December 31, 2006, nonspouse beneficiary rollovers3

The direct rollover rules, automatic rollover option, and withholding rules applicable to qualified retirement plans ( Q 4001) also apply.4

Transfers between eligible Section 457(b) plans remain the only option for eligible Section 457(b) plans of nongovernmental private tax-exempt organizations.5

Contrast this with a 457(f) “ineligible” plan benefit that may not be rolled over into another qualified retirement plan, 457(b), another 457(f) plan or an IRA at all, and is taxable upon vesting according to 457(f) and subject to the inclusion rules for violations of Section 409A.6





1.   IRC § 457(d)(1)(C); Treas. Reg. § 1.457-7(b)(2).

2.   IRC §§ 402(c)(8)(B), 403(b)(8)(A)(ii).

3.   IRC § 457(e)(16).

4.   IRC §§ 457(d)(1)(C), 3401(a)(12)(E).

5.   IRC § 457(d)(1)(C).

6.   Prop Treas. Reg., REG 1238196-12, June 22, 2016.


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