Does a Disability Affect 457(b) Distributions?

Q: Are distributions from 457(b) plans permitted in the event of disability?

Kimberly Boberg, Taylor Costanzo, Kelly Geloneck and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: No. Unlike 401(k) and 403(b) plans, disability is not a specific triggering event that would allow for a distribution from a 457(b) plan. However, if the disabled employee has experienced an employment termination, a distribution would be permitted. In addition, even if the employee is active, it is possible that the requirements for an unforeseeable emergency distribution could be met, if the plan allows for such distributions.

Note that all distributions from a 457(b) plan are exempt from the 10% premature distribution penalty, so a penalty-free distribution may be taken, regardless of age. Ordinary income taxes would still apply, except for certain distributions from the Roth account of a governmental 457(b) plan.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Amy.Resnick@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future column.