The Implications of a 403B Rollover
Generally speaking, a person may rollover all or part of a distribution from a 403b plan into a traditional IRA or any other eligible retirement plan without having to pay any taxes.
The amount that is taxable with a 403b rollover is the maximum amount that the owner of the plan would be eligible for. Simply put, you will not be able to rollover a portion of your contribution into tax-deferred retirement account if you have already made an after-tax contribution to your 403b.
The rules of 403b Rollovers
Anyone who is considering a 403b rollover should be aware of some important rules, particularly if a distribution is made directly to you. What this means is that it is tremendously important to know how to do a 403b rollover the right way and to understand what you can expect to happen when it comes time to do the rollover. Going about a 403B rollover can cause you some unnecessary tax penalties, so it is very important to follow all the rules and guidelines that the IRS has implemented, some of which are outlined below.
The Sixty-Day Rollover Rule
In general, a 403b rollover has to be effectively completed by the 60th day after you have received a distribution. Anyone who is planning to roll over the funds into another account should then have no difficulty meeting this particular requirement. If you are planning to hold on to the money for past the 60th day for whatever reason, you will likely be liable to large tax penalties. There are certain exceptions that the IRS allows to this 60-day rule however, one of which has to do with unforeseen circumstances or hardships.
Rollovers to 403b Plans
If a person receives a distribution from another 403b plan-or any other eligible retirement plan for that matter-that money can be rolled-over into a 403b plan and it will be tax-free. Furthermore, any pre-tax and after-tax contributions that the distribution contains, and is rolled-over will be treated as pre-tax amounts.
403b Rollovers to 401k Plans
Generally speaking, it is possible to rollover a 403b account into most qualified retirement plans. This would include traditional IRAs, 401k plans, SEP IRA and even Roth IRAs that are applied for after December 31, 2007. Keep in mind though, that in some cases, you may have to include some of these amounts in taxable income, and that a 403b plan cannot be rolled over into a SIMPLE IRA.
Rules with regard to withholding for 403b Rollovers
There are two ways by which distributions from a 403b plan can be made. These can either be made to you as an individual or directly into another qualifying retirement plan. You will have to be aware of certain withholding rules if you want to receive the distribution directly.
403B plans and Direct Rollovers
In certain cases, you may also be able to have your 403B plan rolled over directly to an IRA or to a new 403b plan by your plan administrator. This is by far the most common way to make a rollover since the 20% withholding rule does not typically apply to direct rollovers.
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