- 1). Determine whether your 457 plan is "qualified" or "non-qualified"; this information might be available on your account statement. Only assets in qualified 457 plans, also known as 457(b) plans, can be rolled over into an IRA.
- 2). Contact your former employer and find out whether you made any after-tax contributions to your 457 plan. If so, ask for documentation showing both the pre-tax and the after-tax contribution amounts.
- 3
Consider getting a separate check for any after-tax contributions.check book image by Rob Hill from Fotolia.com
Determine whether you would prefer a separate check made out to you for any after-tax contributions. Once you have rolled 457 assets into an IRA, the IRS requires that any distributions you take include a proportional amount from both after-tax and pre-tax contributions. It will not allow you to take a distribution, for example, from your after-tax contributions only. - 4). Open a rollover IRA with a reputable online brokerage firm, indicating on your application that you will fund the account with assets from another retirement account. If you have after-tax contributions, consider opening a taxable brokerage account at the same time and funding it with the after-tax portion of your 457 assets.
- 5). Contact your brokerage firm and ask whether it can accept the assets in your 457 plan. In most cases the mutual funds you hold will be proprietary, and you will not be able to transfer them to your new account. This is not necessarily a drawback, however, because your new IRA will allow you to buy and sell a much broader array of individual stocks, bonds and mutual funds.
- 6). Contact your 457 plan administrator and request instructions to roll your assets over to your new IRA. If you need to sell your investments, you can do it yourself or request that the administrator take care of the sales for you. You can combine this step with Step 2 above, but you will not be able to take any action until you have opened a rollover IRA account.
- 7). Make sure the plan administrator issues a check directly to your new brokerage firm for you as beneficiary. If it makes the check out to you, your plan administrator is required to withhold 20 percent in taxes, even if you deposit the whole check into a new IRA account.
- 8). Follow up with both parties if the rollover is not completed within three weeks or less. Allow an additional couple of weeks if your assets can be transferred "in kind," or without you having to sell them.
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