Rolling a 401(k) into a 457(b) is allowed, but only when the receiving 457(b) is a governmental plan sponsored by a state, county, city, or other public employer. Non-governmental 457(b) plans, sometimes called top-hat plans, cannot legally accept rollover money from a 401(k). Even a governmental plan that qualifies under federal law has to choose to accept incoming rollovers, so your first call is to the 457(b) administrator to confirm the plan takes them and which types of money it will take.
Which 457(b) Plans Can Accept the Money
Federal tax law defines an “eligible retirement plan” — the type of account that can receive a rollover from a 401(k) — as including only a 457(b) maintained by a state or local government employer.1Office of the Law Revision Counsel. 26 U.S. Code 402 – Taxability of Beneficiary of Employees Trust The IRS rollover chart confirms that pre-tax money in a 401(k) can move into a governmental 457(b).2Internal Revenue Service. Rollover Chart
Non-governmental 457(b) plans, offered by tax-exempt organizations like hospitals, charities, and universities to select high-earning employees, are excluded from the rollover rules entirely.3Office of the Law Revision Counsel. 26 USC 457 – Deferred Compensation Plans of State and Local Governments and Tax-Exempt Organizations If you participate in one of these, 401(k) money cannot come in. Check your plan’s summary plan description or ask the administrator to confirm how your 457(b) is classified.
Even governmental 457(b) plans are not required by federal law to accept incoming rollovers. Most do, but the decision sits in each plan’s governing documents. Before gathering paperwork, ask whether the plan accepts rollovers from a 401(k) and whether it takes pre-tax money, Roth money, or both.
When Your 401(k) Will Release the Funds
Before any money can move, your 401(k) plan has to allow you to take a distribution. Most plans only release funds when a qualifying event occurs:
- Separation from service — you leave the employer that sponsors the 401(k), whether through resignation, layoff, or retirement.
- Reaching age 59½, which many plans treat as an in-service distribution trigger even if you’re still working.
- Total and permanent disability.
- Termination of the plan itself.
Without one of these events, the 401(k) provider cannot legally release the funds for rollover.4Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions If you’re still employed by the 401(k) sponsor and under 59½, the rollover generally has to wait until your employment ends.
Direct Rollover vs. Indirect Rollover
Two methods exist for moving 401(k) money into a 457(b). The direct rollover is almost always the better choice.
Direct Rollover
In a direct rollover, the 401(k) plan sends the money straight to the 457(b) plan. You never touch the funds. Because the money moves trustee-to-trustee, no taxes are withheld and no early withdrawal penalty applies.5Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions The 401(k) provider may issue a check payable to the new plan’s trustee “for the benefit of” (FBO) you, or send the funds electronically.
Indirect Rollover
In an indirect rollover, the 401(k) plan pays the distribution to you personally. When that happens, the plan must withhold 20% of the taxable amount for federal income taxes.6Internal Revenue Service. Topic No. 413, Rollovers From Retirement Plans You then have 60 days from the date you receive the funds to deposit the full distribution amount — including the 20% that was withheld — into the 457(b) plan.7eCFR. 26 CFR 1.402(c)-2 – Eligible Rollover Distributions To make the rollover whole, you have to replace that 20% out of pocket. Any amount not deposited within the 60-day window becomes taxable income and may also trigger a 10% early withdrawal penalty if you’re under 59½.
How Pre-Tax and Roth Money Are Handled Separately
The tax character of your 401(k) balance determines where it can land inside the 457(b).
Pre-tax 401(k) money rolls into the traditional pre-tax portion of a governmental 457(b). This is the most common rollover and the one virtually all governmental 457(b) plans accept.
Roth 401(k) money can only roll into a designated Roth account within the 457(b), or into a Roth IRA. It cannot go into a pre-tax 457(b) account.1Office of the Law Revision Counsel. 26 U.S. Code 402 – Taxability of Beneficiary of Employees Trust Not every governmental 457(b) offers a designated Roth account, though federal law permits them to do so.8Internal Revenue Service. IRC 457(b) Deferred Compensation Plans If your 457(b) doesn’t have a Roth option, the Roth 401(k) balance stays in the 401(k) or rolls into a Roth IRA instead.
On the rollover paperwork, identify the tax character of the funds accurately. Your 401(k) provider needs to know which portion is pre-tax and which is Roth so each type routes to the correct account.
The 10% Penalty Follows the Rolled Money
One of the biggest advantages of a governmental 457(b) is that distributions taken after you leave the sponsoring employer are not subject to the 10% early withdrawal penalty, regardless of age. That benefit does not extend to money you roll in from a 401(k).
Federal law provides that any distribution from a governmental 457(b) attributable to funds rolled over from a qualified plan like a 401(k) is treated as though it came from the original qualified plan for penalty purposes.9Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts If you withdraw the rolled-over 401(k) money from your 457(b) before age 59½, you’ll owe the 10% penalty on that portion, even though a withdrawal of your original 457(b) contributions would be penalty-free.
To enforce this, your 457(b) plan is required to separately track money that came from a 401(k) rollover. That accounting ensures the correct penalty treatment applies at distribution.10Internal Revenue Service. Notice 2013-74 Separate tracking has an upside: the plan may allow you to request distributions from the rollover account at any time (subject to the penalty if under 59½), which is more flexibility than you’d have with your regular 457(b) contributions.
Outstanding 401(k) Loans at Separation
If you have an unpaid loan balance in your 401(k) when you leave, the outstanding amount is generally treated as a distribution, called a plan loan offset. How you handle it decides whether you owe taxes.
A qualified plan loan offset happens when the loan was in good standing and the offset occurs because you left your employer or the plan terminated. In that case, you have until your tax return due date (including extensions) for the year of the offset to roll the offset amount into your 457(b) or another eligible plan.11Internal Revenue Service. Safe Harbor Explanations – Eligible Rollover Distributions If you separate from service in 2026, for instance, you’d generally have until October 15, 2027 (with an extension) to complete the rollover of the offset amount.
If the loan offset happens for another reason, such as missing required payments while still employed, you only have 60 days from the offset date to roll the amount over. A loan treated as a deemed distribution, where you defaulted but the plan didn’t offset the balance, is not eligible for rollover at all.7eCFR. 26 CFR 1.402(c)-2 – Eligible Rollover Distributions Because the loan balance isn’t cash, you’d have to come up with the money from other sources to deposit into the 457(b).
Spousal Consent if You’re Married
If you’re married and your 401(k) is subject to the qualified joint and survivor annuity rules, federal law may require your spouse’s written consent before the plan processes a distribution, including a rollover. This applies most often to money purchase pension plans and traditional defined benefit plans, but some 401(k) plans include the provisions too.
Where consent is required, the spouse’s signature must be witnessed by a notary public or a plan representative.12U.S. Department of Labor. FAQs About Retirement Plans and ERISA Ask the 401(k) administrator early whether the requirement applies to your account, since arranging a notarized signature adds time.
Steps to Complete the Rollover
Once the governmental 457(b) has confirmed it accepts rollovers and you qualify for a distribution from your 401(k), the process is a coordination between the two plans.
- Contact the 457(b) administrator first. Ask for the plan’s rollover acceptance procedures, the trustee’s name and mailing address, and any required forms. Get the exact payee name to use on the rollover check, typically the trustee name followed by “FBO” and your name.
- Request a distribution from the 401(k). Complete the plan’s distribution form and select “direct rollover” as the method. Provide the 457(b) trustee’s information and your new account number. If you have both pre-tax and Roth balances, specify which portions to roll.
- Submit the forms. Most providers accept secure digital uploads; some still require original signatures by mail. Include the notarized spousal consent form if it applies.
- Monitor the transfer. A direct rollover typically takes two to four weeks. Watch the 401(k) balance to confirm the funds have left, and check the 457(b) to confirm they’ve arrived.5Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
- Verify the final amount. Once the 457(b) shows the incoming rollover, confirm the dollar amount matches what left the 401(k) and that the funds are categorized correctly (pre-tax rollover vs. Roth rollover). Report any discrepancies to the 457(b) administrator promptly.
How the Rollover Shows Up on Your Taxes
A direct rollover isn’t a taxable event, but both plans still report to the IRS. Your 401(k) provider issues a Form 1099-R for the year of the distribution, showing the total amount distributed with distribution code G in Box 7 to indicate a direct rollover. Box 2a (taxable amount) should show zero.13Internal Revenue Service. Instructions for Forms 1099-R and 5498
You report the rollover on your federal return for that year, and the taxable amount will be zero if the rollover was completed correctly. For an indirect rollover, the 1099-R will show the 20% withholding; you account for that on the return by claiming credit for the taxes withheld and confirming the full amount was redeposited within 60 days.
Keep copies of the 1099-R, the rollover confirmation from the 457(b), and any correspondence between the plans. Those records matter if the IRS ever questions whether the rollover was properly completed.