457 Distributions

Q: A participant in a governmental 457(b) plan rolled money from a 401(k) plan into his 457 plan. Is it correct that a distribution of the 401(k) assets from the 457(b) would be exempt from the 10% premature distribution penalty, as long as the participant was at least age 55 in the year he separated from service with his 457 plan employer?

A: Yes, if any one of the exceptions to the penalty tax applies — including attainment of age 55 or later, in the same year as severance of employment — then there would be no penalty tax on the 401(k) amount rolled into the 457(b) plan.