Which statement is true about Section 457 Plans?

Which statement is true about Section 457 Plans?

• A. True: They are exempt from ERISA and distributions may NOT be rolled into an IRA
• B. False: They are subject to ERISA and distributions may be rolled into an IRA
• C. True: Distributions may be rolled into an IRA
• D. False: They require a 10% early withdrawal penalty

Answer: (A)

Section 457 plans are nonqualified deferred-compensation arrangements used mainly by government employers and some nonprofits. They aren’t governed by ERISA, which is why they’re described as exempt from ERISA. In the material you’re studying, the statement pairs that exemption with a prohibition on rolling distributions into an IRA. So, the combined idea—these plans are ERISA-exempt and distributions may not be rolled into an IRA—is presented as true. The other choices conflict with how 457 plans are treated: they aren’t subject to ERISA, and the typical rule prohibits rolling 457 distributions into an IRA (though penalties for early withdrawals aren’t the defining issue here).

Section 457 plans are nonqualified deferred-compensation arrangements used mainly by government employers and some nonprofits. They aren’t governed by ERISA, which is why they’re described as exempt from ERISA. In the material you’re studying, the statement pairs that exemption with a prohibition on rolling distributions into an IRA. So, the combined idea—these plans are ERISA-exempt and distributions may not be rolled into an IRA—is presented as true. The other choices conflict with how 457 plans are treated: they aren’t subject to ERISA, and the typical rule prohibits rolling 457 distributions into an IRA (though penalties for early withdrawals aren’t the defining issue here).