457(f) and part time employment

[dtrackman]

My wife is transitioning from full time work to part time/retainer work for the same higher education organization.  Is her 457(f) considered taxable at the end of the full time employment or the part time employment.  Contributions end with her full time employment.

[CalCountry · Accepted solution]

Taxation of contributions previously made to a 457(f) (so-called "ineligible") retirement plan is typically controlled by whether the risk of forfeiture of contributions to the plan has been eliminated, not by the employee's full/part time employment status.  Of course, withdrawals may or may not be taxable based on the nature of your contributions made.   However it is crucial to consult the plan's administrator (and a tax professional familiar with 457 plans) for specific information.

See the citation below and more details from the IRS website at:
      https://www.irs.gov/retirement-plans/non-governmental-457b-deferred-compensation-plans

"Ineligible 457(f) plans distinguished

Non-governmental 457 plans can be established by tax-exempt organizations as:
•"eligible" under IRC Section 457(b), or
•"ineligible" under IRC Section 457(f).

Non-governmental, tax-exempt entities can establish 457(f) (ineligible) plans that are tax deferred and that allow contributions exceeding the annual deferral limit. These plans and the associated deferrals are possible only if there is a "substantial risk of forfeiture" – when the risk has been removed, the participant’s deferral amounts become taxable."