Do 457 Plans Have RMDs? Exceptions, Penalties, and Inheritance

Governmental 457(b) plans do have required minimum distributions, and they follow the same rules that apply to 401(k)s and traditional IRAs: withdrawals must generally begin at age 73.¹ Non-governmental 457(b) plans, offered by tax-exempt employers like hospitals and charities, work differently. They are non-qualified arrangements, and distribution timing is set by the plan document rather than by an IRS age threshold.² That single split, governmental versus non-governmental, decides nearly every RMD question a 457 participant will ask.

When RMDs Start for a Governmental 457(b)

If you participate in a state or local government 457(b), your required beginning date is April 1 of the year after you turn 73. That age applies if you were born between 1951 and 1959. For anyone born in 1960 or later, the RMD age rises to 75, but that change does not take effect until 2033.³

The first-year timing catches people off guard. You can delay your very first RMD until April 1 of the year after you reach RMD age, but your second RMD is still due by December 31 of that same year. Use the April 1 grace period and you end up taking two taxable distributions in one calendar year, which can push you into a higher bracket.

How the Amount Is Calculated

The math is simple. Take your account balance as of December 31 of the prior year and divide it by your life expectancy factor from the IRS Uniform Lifetime Table. A different table, the Joint Life and Last Survivor Table, applies if your sole beneficiary is a spouse more than ten years younger than you, and it produces a smaller distribution.⁴

So if your 457(b) balance was $400,000 on December 31 and your Uniform Lifetime factor is 26.5, your RMD for the following year is roughly $15,094. The factor shrinks each year, so your required percentage grows as you age even if the balance holds steady.

One important wrinkle: employer plans don’t allow aggregation. If you own more than one 457(b), you must calculate and withdraw the RMD from each account separately.⁵ A 401(k) from a former employer works the same way. You cannot satisfy one plan’s RMD by pulling extra from another. IRAs are the exception, since IRA owners can total their RMDs and withdraw the full amount from a single IRA.

The Still-Working Exception

If you are still employed by the government agency that sponsors your 457(b), you can delay RMDs from that plan until April 1 of the year after you actually retire, even if you have already passed 73.¹ This mirrors the still-working exception for 401(k) participants, but it is practically easier to use in a governmental 457(b) because the 5% ownership restriction is irrelevant. You cannot own 5% of a government entity.

The delay only applies to the plan sponsored by your current employer. An old 457(b) from a previous government job does not get the same treatment. You either start RMDs on the normal schedule or roll the balance into your current employer’s plan. Rolling in a 401(k) or traditional IRA balance to an active governmental 457(b) can also shelter those funds under the still-working exception, which is a legitimate planning move for people working past 73.

Roth 457(b) Accounts

Starting in 2024, designated Roth accounts inside governmental 457(b) plans are no longer subject to RMDs during the owner’s lifetime. SECURE 2.0 eliminated the RMD requirement for all designated Roth accounts in employer-sponsored plans, bringing them into line with Roth IRAs.¹ Before the change, Roth 457(b) participants either took the distributions or rolled the balance into a Roth IRA. That workaround is no longer necessary.

Only the Roth portion escapes. Pre-tax dollars in the same plan still follow the standard RMD rules, and beneficiaries face distribution requirements after your death regardless of whether the account holds Roth or pre-tax money.

Non-Governmental 457(b) Plans

If you work for a tax-exempt organization, your 457(b) is a non-qualified deferred compensation arrangement, and the age-based RMD system simply does not apply.² Distributions follow whatever schedule the plan document specifies. The usual triggers are separation from service or a date you selected in your deferral agreement before earning the compensation. There is no required beginning date tied to a birthday and no IRS penalty for failing to take a distribution by a certain age.

The trade-off is real. Your money is not held in a trust. It remains the property of your employer and is reachable by the employer’s general creditors if the organization faces bankruptcy or litigation.² You are an unsecured creditor of your own employer until the money is actually paid. Once a distribution event triggers, payments must follow the pre-set schedule in the plan document. Deviating from that schedule, or failing to make a timely election, can cause the entire deferred amount to become taxable at once.

Non-governmental 457(b) balances also cannot be rolled into an IRA, a 401(k), or a governmental 457(b). The money is locked inside the plan’s distribution framework, which makes your initial deferral election more consequential than in any other type of retirement account.

457(f) Plans Are Different Again

A 457(f) plan is sometimes confused with a 457(b). These are ineligible deferred compensation arrangements, typically used by tax-exempt employers for executives and key employees. Standard RMD rules do not apply. Instead, deferred compensation is included in your gross income in the first year there is no substantial risk of forfeiture, meaning the year your rights to the money are no longer conditioned on future service or performance.⁶ The tax event is vesting, not distribution. There is no annual calculation and no age-based trigger.

What Happens If You Miss an RMD

Fail to withdraw the full amount from your governmental 457(b) by the deadline and the IRS imposes a 25% excise tax on the shortfall.⁷ The penalty drops to 10% if you correct the mistake inside the correction window, which generally runs through the end of the second tax year after the year the penalty applies.

You report and pay the penalty on IRS Form 5329, and the same form is used to request a waiver. If the missed RMD resulted from a reasonable error, such as a plan administrator’s mistake or a serious illness, the IRS can waive the penalty entirely. You attach a written explanation describing the error and the steps you have taken to fix it.⁷ Waivers are granted fairly regularly when the facts support them, but you must actually take the missed distribution before or at the time you file.

RMDs on an Inherited 457(b)

When a governmental 457(b) participant dies, the beneficiary’s distribution requirements depend on their relationship to the deceased. Under current rules, most non-spouse beneficiaries must empty the account by the end of the tenth year after the year of death.⁸

Certain eligible designated beneficiaries get more favorable treatment and can stretch distributions over their own life expectancy:

A surviving spouse can take distributions over their own life expectancy, delay distributions until the deceased would have reached RMD age, or roll the account into their own IRA or retirement plan.
A minor child can stretch distributions until reaching the age of majority, at which point the 10-year clock starts.
A disabled or chronically ill individual can take distributions over their own life expectancy.
A beneficiary who is not more than 10 years younger than the participant can also use the life expectancy method.

Everyone else, including adult children, siblings, friends, and most trusts, falls under the 10-year rule. No annual withdrawals are required inside that window, just a hard deadline to empty the account.⁸

1
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
2
Internal Revenue Service. Non-governmental 457(b) Deferred Compensation Plans
3
Congressional Research Service. Required Minimum Distribution (RMD) Rules for Original Owners of Retirement Accounts
4
Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
5
Internal Revenue Service. RMD Comparison Chart (IRAs vs. Defined Contribution Plans)
6
Office of the Law Revision Counsel. 26 U.S. Code 457 – Deferred Compensation Plans of State and Local Governments and Tax-Exempt Organizations
7
Internal Revenue Service. Instructions for Form 5329 (2025)
8
Internal Revenue Service. Retirement Topics – Beneficiary