403b rollover to IRA via Annuitization
Client wants to annuitize into IRA account. However, the once a year is coming up from admin. Does the once a year apply here and if so, aren’t we ok if we just change to annual payment on the annutization?
Client wants to annuitize into IRA account. However, the once a year is coming up from admin. Does the once a year apply here and if so, aren’t we ok if we just change to annual payment on the annutization?
Permalink Submitted by Alan Spross on Thu, 2009-07-02 23:14
Attached is a definition of an eligible rollover distribution (ERD). If the distribution amount and frequency qualifies as an ERD, it cannot be rolled over. The (at least) once per year payout is only one consideration:
http://www.retirementdictionary.com/definitions/eligiblerolloverdistribu…
Permalink Submitted by Toby H on Thu, 2009-07-02 23:37
OK thanks, read it. However the payments do NOT fall in that because they are for equal payments for 5 years. So if changed to annual payment it appears i would be ok. Am I missing anything else?
Permalink Submitted by Alan Spross on Fri, 2009-07-03 03:15
Sorry, I meant to say that if it is AN EXCEPTION to an ERD, it cannot be rolled over, but I think you assumed that. With respect to the payout frequency, as long as the payout is over 10 years, the frequency should not matter. It could be monthly or quarterly or annually and the 10 year payout less than 10 years would eliminate the plan as an exception to the ERD, and therefore the rollover would be allowable.
One problem here is tax withholding. The mandatory 20% applies to ERDs, so client will have to front the 20% to shelter the entire distribution from tax. Better yet, if a series of direct rollovers can be negotiated with the plan, it will eliminate the withholding problem.