Rollover w/ Severance
I have a client who had his last day with his employer in June however he is getting a 9 month severance package. That severance is being paid out to him bi-weekly (just like his normal pay check) until early 2025. He has a 403(b) and 457 with the non-profit that he left last month. Can those accounts be rolled over to his IRA now or would he have to wait until after his severance ends? I know employees typically have to wait 1-2 pay cycles after they separate from an employer to be eligible for a rollover (for the financial institution to show them as separated from service) but I am not sure how a severance package would impact this.
Permalink Submitted by Alan - IRA critic on Fri, 2024-07-19 13:19
Client should be eligible for a rollover or distribution despite the severance pay rollout and while they might also be receiving non severance unused vacation or PTO pay from which current deferrals can be made, the actual severance pay itself is not eligible compensation from which 401k deferrals can be made. Client should wait to be sure that all contributions other than from severance have been made to their account, but once that is complete they should be able to do a direct rollover despite the severance rollout, as they have clearly separated from service.