Novel In-Service Distributions from 457(b) Plans


A common query concerning in-service distributions from retirement plans is: Can a governmental 457(b) plan allow participants to obtain plan withdrawals while they are still working? Per a recent law change, governmental 457(b) plans now are able to provide in-service distributions to plan participants beginning at age 59 ½ if the plan sponsor has selected to carry out the provision. Launched by the Setting Every Community up for Retirement Enhancement (SECURE) Act, permitting distributions was a monumental transformation for plan years commencing after December 31, 2019. Prior to this change, 457(b) participants were only able to view their plan assets when they:

  • Reached the required age for minimum distributions;
  • Underwent an unforeseeable emergency;
  • Terminated the plan;
  • Qualified for a one-time cash-out;
  • Severed employment;
  • Divorced—pursuant to a qualified domestic relations order

Plan sponsors who provide these withdrawals are required to amend their plan documents. Formal amendments to integrate the in-service distributions must be done by the summation of the 2024 plan year.

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