Publication 553 - Highlights Of 2002 Tax Changes Page 22
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31rolled over is treated as consisting first of pre-tax amounts
came subject to tax when paid or otherwise made available
(contributions and earnings that would be includible in
to you.
income if no rollover occurred).
Rollovers. A 457 plan is a qualified retirement plan for
Years of service for church employees and ministers.
rollover purposes. You may be able to roll over certain
If you are a minister or church employee, treat all of your
distributions to and from these plans. For more information
years of service as an employee of a church or a conven-
about rollovers to and from qualified retirement plans, see
tion or association of churches as years of service with one
Rollovers in Publication 575.
employer. Prior law required church employees and minis-
Tax on early distributions. The tax on early distributions
ters to figure years of service separately for each em-
may apply to a distribution from a 457 plan to the extent it is
ployer.
attributable to amounts rolled into the plan from another
Foreign missionaries. If you are a foreign missionary,
type of qualified retirement plan. For more information
contributions to your 403(b) account will not be treated as
about the tax on early distributions, see Tax on Early
exceeding the limit on annual additions if the contributions
Distributions in Publication 575.
are not more than the greater of:
Changes to the coordination rules between 403(b)
•
$3,000, or
plans and 457 plans. If you contribute to both a 403(b)
•
plan and a 457 plan in the same year, you do not reduce
Your includible compensation.
the maximum deferral limit of the 457 plan by the amount of
contributions made to your 403(b) account. If you contrib-
Direct trustee-to-trustee transfer. If you make a direct
uted to a 457 plan in 2002, see your plan administrator for
trustee-to-trustee transfer from your 403(b) account to a
contribution limits.
defined benefit governmental plan, the transferred amount
is not includible in gross income if it is used to purchase
Earned Income of Members of
permissive service credits or repay contributions and earn-
Recognized Religious Sects
ings that were previously refunded under a forfeiture of
service credit under another plan maintained by a state or
For years beginning after 2001, earned income for retire-
local government employer within the same state.
ment plans includes amounts received for services by
self-employed members of recognized religious sects op-
457 Plans
posed to social security benefits who are exempt from
self-employment tax.
Beginning in 2002, the following changes apply to deferred
compensation plans of state and local governments and
Thrift Savings Plan
tax-exempt organizations (section 457 plans). For more
information, see Publication 525, Taxable and Nontaxable
Income.
Catch-up contributions. Participants in the Thrift Sav-
ings Plan who are age 50 or older at the end of the plan
Limit on elective deferrals. The special limit on elective
year generally will be able to make catch-up contributions.
deferrals for section 457 plans no longer applies. Deferrals
The catch-up contribution a participant can make for a year
under these plans are subject to the general limit for
cannot exceed specific limits.
elective deferrals ($11,000 for 2002). The special catch-up
Implementation of the catch-up contribution limits will
limit in the last 3 years before retirement is twice the
take place at the earliest practicable date.
general limit amount.
Rollovers
Catch-up contributions. You may be allowed catch-up
contributions (additional elective deferrals) if you are age
50 or older by the end of the year.
For distributions after 2001, the following changes apply to
rollovers. For more information about rollovers, see Publi-
Qualified domestic relations order (QDRO). If you re-
cation 575, Pension and Annuity Income, and Publication
ceive a distribution or payment under a QDRO from a 457
590, Individual Retirement Arrangements (IRAs).
plan in which your spouse or former spouse is a partici-
pant, you generally must pay tax on it. For distributions or
Eligible rollover distribution. You may be able to roll
payments before 2002, the plan participant generally
over the nontaxable part of a retirement plan distribution
would have had to pay the tax. Under the new law, the plan
(such as your after-tax contributions) to another qualified
retirement plan or traditional individual retirement account
participant still must pay the tax if the distribution or pay-
ment is made to a child or other dependent. For more
(IRA). The transfer must be made either through a direct
information about QDROs, see the discussion under Gen-
rollover to a qualified plan that separately accounts for the
eral Information in Publication 575, Pension and Annuity
taxable and nontaxable parts of the rollover or through a
Income.
rollover to an IRA.
When to include deferred amounts in income.
Hardship distributions not eligible for rollover. A hard-
Amounts in 457 plans are generally deferred from tax until
ship distribution from any retirement plan is not an eligible
paid to you. Before 2002, these amounts generally be-
rollover distribution.
Page 22
Chapter 3 IRAs and Other Retirement Plans
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