While I’m working and have money invested in ING through the Deferred Comp, is that investment a 401K?
When I retire and want to continue my deferred comp with my backdrop in ING, will that be considered a 401K?
The fact that there is considerable confusion about tax deferred savings arrangements is completely understandable. These plans get their common names from the sections of the Internal Revenue Code under which they are established and if you’ve looked at the Code in any detail you will note that it was not designed for ease of understanding. Initially there were significant differences between the rules applicable to the various plans and, while they have moved closer to each other over the years, some differences remain.
First of all, section 401(k) plans cannot presently be established by governmental employers. Consequently, 401(k) plans are not an issue for State of Missouri employees.
MOSERS is a section 401(a) defined benefit plan.
The State of Missouri Deferred Compensation program consists of two plans.
- A 457 plan which is where your contributions are deposited.
- A 401(a) defined contribution plan which is for the state’s incentive payments and rollovers, such as your BackDROP payment.
The tax laws do not permit rolling distributions over from a 401(a) plan (like MOSERS) to a 457 plan (like where your own contributions are held in the deferred compensation program). However, rollovers are allowed between 401(a) plans. Consequently, you may roll your BackDROP distribution from MOSERS over to the 401(a) component of the deferred compensation program.
There is one thing you need to be aware of regarding distributions from a 401(a) defined contribution plan (which, as mentioned, is where your BackDROP amount would be held if you do roll it over to the deferred compensation program). If you terminate employment with the state prior to age 55, amounts withdrawn from the 401 (a) account (including your BackDROP rollover) before age 59 ½ would be subject to a 10% premature distribution tax in addition to ordinary income tax.
