403b to IRA transfer possible?
I have a client that wants to move his 403b to a safer investment. He’s with a mutual fund company now and they have no guaranteed options, which is what he is looking for. He’s still employed at a local community college but not putting anything into it. He’s around 50. With the new 403b regs, his community college will be sponsoring their own 403b plan. I thought we couldn’t do 403b transfers to other 403bs or IRAs now, but wondered how the IRS might look at this situation since the employer won’t let him contribute to this plan anyway and the employer is sponsoring a new plan with a new plan document. Does this make his old plan (that the employer had no part in other than doing salary deductions for) portable in any way? We’re trying to figure out how to get it into something guaranteed (other than by transferring it into the employer’s new plan).
Permalink Submitted by Clyde Wolf on Fri, 2008-09-12 23:44
Cfg,
It sounds like your client has an “orphaned 403b account”.
This was discussed briefly on these boards a few days ago, here: http://www.irahelp.com/phpBB/viewtopic.php?area=&t=2055.
Permalink Submitted by Janine Janine on Mon, 2008-09-15 17:24
I had a 403B account (employer not contributing, merely sending the funds) with a mutual fund company. I simply had Fidelity roll-over the account keeping all the same funds into an IRA, and I kept this roll-over separate from a tradional IRA. I would assume that if I chose, I could do a trustee-to-trustee transfer to a bank which is FDIC insured, plus SIF or DIF for full protection. However, since I do not need the money and bank interest rates are dismal, I prefer to wait out the market.
Permalink Submitted by [email protected] on Mon, 2008-09-15 18:00
It looks like he may have both an NGOA and a GOA – one mutual fund 403b that he stopped contributions in 3/04 (but has never been transferred) and another mutual funds 403b he started in 3/04 that is receiving current contributions. No employer contributions in either, no employer plan document and employer did not sponsor either plan. Merely allowed salary deferrals.
Can he do any type of transfer with either? If not, as a last resort, wouldn’t a 72t be possible?
Permalink Submitted by Clyde Wolf on Mon, 2008-09-15 18:14
Starlight4036,
Your assumption is correct. You can move your IRA account to any IRA trustee you choose. Using the Trustee to Trustee Transfer is best. This is because there is no withholding using this type of transfer.
Permalink Submitted by Clyde Wolf on Mon, 2008-09-15 18:40
Cfg,
The Non Grandfathered Orphaned Account (NGOA) can be transferred to an IRA if the employee is over age 59.5 years.
Another possibility would be if the employer’s plan allows, the NGOA can be transferred to the empoyer’s plan.
Failing those two options, the NGOA must just remain where it is and no distributions are allowed as long as the employee is employed by the employer.
The Grandfathered Orphaned Account (GOA) can be maintained as is and distributions can be taken in accordance with 403b rules. As you indicate, a 72t could be put in place. The 72t requires the longer time of 5 years or until the employee reaches age 59.5 years.
Another option would be to transfer this account to the employer’s plan if the employer’s plan accepts such transfers.
For both types of Orphaned Accounts, the employee has the option to transfer or not transfer, it is the employees money.
Permalink Submitted by [email protected] on Mon, 2008-09-15 20:02
Guess I’m not tracking on this. Employee is 50 so that rules out IRA rollover it appears. So you’re saying the NGOA must just “remain where it is and no distributions are allowed as long as the employee is employed by the employer. ”
But at the end you say, “For both types of Orphaned Accounts, the employee has the option to transfer or not transfer, it is the employees money.” Meaning we can transfer to any other 403b but not an IRA?
Permalink Submitted by Clyde Wolf on Mon, 2008-09-15 20:27
Cfg,
As I see the rules, the NGOA goes to the new 403b or stays as is. That is the employee’s options.
Separation from the employer would allow transfer to an IRA.
Permalink Submitted by [email protected] on Mon, 2008-09-15 21:39
Thanks 🙂