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Requesting Funds from Rollovers

Q. Suppose you have a participant who retires and rolls over funds from the now former employer’s retirement system’s drop program into a 457 deferred compensation plan (DCP) account. The participant then went back to work for the company providing the 457 and also is currently making contributions into the 457 DCP.

Can this participant request funds from the amount rolled over, or must there be a qualifying event in order for him to withdraw these funds as specified by the IRS rules?

A. Yes. The rules require that the rolled over amount be segregated and free of withdrawal restrictions. Keep in mind, however, that withdrawals from that amount before age 59½ may be subject to a premature distribution penalty tax! 


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