457(b) Distributions going to IRA?

Did some cleaning up of old previous job retirement accounts last year. Both jobs were academic/nonprofit and have 403(b),401(a) and 457(b)'s. No issues rolling the 401’s and 403’s into my IRA (although Fidelity required that I first put them into a new IRA under their jurisdictions until rolling that combined amount into my TDA IRA). I did clear the Fidelity 457(b), a bit of a pain and have yet to transfer the TIAA account.

Question is, the Fidelity 457(b) payout is tax “formed” as a W-2, can I treat that like earned income (which is was 10 years ago) and contribute part to my IRA?

It’s not a big deal if I do or don’t, but just wondering. Also, since I have another pool to transfer, is there anyway to do something upfront and contribute at that time or even contribute more or all as a “rollover”? I was unable to get that information originally. Long story, mainly just poorly staffed, under informed individuals at my prior employees HR division.

Thanks!
Lakedog

Question is, the Fidelity 457(b) payout is tax “formed” as a W-2, can I treat that like earned income (which is was 10 years ago) and contribute part to my IRA?

I’m confused. Are you saying, or are you asking, if you will get a W-2 that documents your distribution from the 457(b) plan? If you are saying that you expect to, then I would ask where you got that information.

If you are asking, the answer is no - 457(b) distributions, just like distributions from other retirement plans, are supposed to be documented on a 1099-R, not a W-2. Any distributions documented on a 1099-R are not considered earned income for making IRA contributions.

I would point out that contributions to other retirement plans, like 401(k)s and 403(b)s, were also earned income, and distributions from those plans are not allowed to be used to make new contributions to an IRA. If the distribution is eligible, it can be rolled over into an IRA. But RMDs and distributions from many 457(b) plans are not eligible to be rolled over.

Also, since I have another pool to transfer, is there anyway to do something upfront and contribute at that time or even contribute more or all as a “rollover”?

Since you said earlier both jobs were academic/non-profit that would indicate that your 457(b) plans were not governmental 457(b)s. In that case, your 457(b)s are not eligible for rollover, since only governmental 457(b)s are eligible for rollovers. See https://www.irs.gov/retirement-plans/comparison-of-tax-exemp… for a comparison of tax-exempt and governmental 457(b)s.

AJ

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Thanks AJ for chiming in. Always appreciate your kind help and information.

I’m confused. Are you saying, or are you asking, if you will get a W-2 that documents your distribution from the 457(b) plan? If you are saying that you expect to, then I would ask where you got that information.

We are equally confused. I was just doing my due diligence collecting and double-checking all records/forms for the year to complete the filing and store, when I couldn’t find any form except my deposit notice which also cited the taxes withheld. Went searching and after a hunt, found my form on their benefits site. But not as the expected 1099-R, but as a “W-2 Wage and Tax Statement 2021.” Not what I was expecting. It does have space 11 “Nonqualified plans” filled in with the amount and when I entered it into HR Block, they accepted asking about if it was a non-qualified plan. The computer seemed happy.

That all made me wonder about the possibility and hence my asking this learned group.

Regardless, I will probably not bother to try to add to my IRA now, and just move forward. However, the remaining 457(b) is from employment with the State of WA via UW. Academic, but governmental and I’ll have to look deeper as it looks like it could be rolled over to an IRA.

Thanks for thoughts.

Lakedog

Reporting of deferred income is reported on a W-2. We had contributions to a 409A. Distributions were reported on a W-2. The distributions were shown as taxable and not subject to Social Security or Medicare taxes. Since they weren’t subject to Social Security or Medicare taxes, I assumed they weren’t considered earned income.

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vkg,

You’re probably spot-on. There was no SS or Medicare taxes. It was from a non-governmental, non-profit. I’ve already decided not to waste time pursuing this distribution.

However, the other, yet to be distributed, is governmental and I would be interested in trying to tuck it into my Roth if doable. I’ll have to recontact them and see what options I have.

Thanks!
Lakedog

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Question is, the Fidelity 457(b) payout is tax “formed” as a W-2, can I treat that like earned income (which is was 10 years ago) and contribute part to my IRA?

I’m confused. Are you saying, or are you asking, if you will get a W-2 that documents your distribution from the 457(b) plan? If you are saying that you expect to, then I would ask where you got that information.

I just saw one of these for the first time. The payment represents deferred earnings from either a non-qualified or non-governmental 457(b) plan. While I don’t know the answer to the question definitively, my gut feeling is that any box 1 compensation on a W-2 is eligible for contribution to a retirement account subject to the usual rules.

Ira

The payment represents deferred earnings from either a non-qualified or non-governmental 457(b) plan. While I don’t know the answer to the question definitively, my gut feeling is that any box 1 compensation on a W-2 is eligible for contribution to a retirement account subject to the usual rules.

Ira

Even though it isn’t subject to FICA and Medicare when distributed?

I just saw one of these for the first time. The payment represents deferred earnings from either a non-qualified or non-governmental 457(b) plan. While I don’t know the answer to the question definitively, my gut feeling is that any box 1 compensation on a W-2 is eligible for contribution to a retirement account subject to the usual rules.

Replying to myself - these payments are not eligible for contribution to an IRA. I actually tried it in my software - client had ~$2000 of actual W-2 wages and $12K of deferred 457(b) earnings. When I set the program to maximize the deductible IRA contribution it only allowed the regular W-2 wages.

Ira

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