403b1 characteristics vs. 403b7
A 403b1 can allow for penalty free withdrawals if the participant separates from service on or after their 55th birthday. A 403b7 does not allow for this. If a 403b7 were rolled over into a 403b1 that allows for penalty free withdrawals at age 55, would it take on the characteristics of the 403b1?
Permalink Submitted by Alan Spross on Fri, 2009-12-04 23:25
Where is the info coming from that a 403b7 does not qualify for the age 55 separation exception? See following from 403b wise site:
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What is a 403(b)(7)?
The IRS created the 403(b) in 1958. In 1974 Congress added paragraph (7) which allowed employees to set up retirement plans directly with mutual fund companies. Prior to this change contributors were limited to investment choices offered by insurance companies. Throughout this site the term 403(b) is intended to mean all of the following: 403(b), 403(b)(7) and TSA.
When can 403(b) money be accessed without penalty?
Generally, penalty-free distribution from a 403(b) cannot occur until the participant:
Reaches age 59 1/2
Separates from service in the year turning 55 (and must be retired)
Retire before age 55 — eligible for Substantially Equal Periodic Payments (SEPP). Participants who have retired early (before age 55), but want access to their 403(b) without penalty can do so using SEPP. This provision requires that you take a series of substantially equal periodic payments. The key is that once you start these payments they must continue for five years or until you reach 59 1/2, whichever takes longer. If you start at age 58 you must continue until you are 63 (minimum 5 years).
Becomes disabled (as defined in section 72(m)(7) of the Internal Revenue Code)
Through a loan (some investment companies allow this, some do not)
Dies
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The age 55 rule appears to apply to paragraph 7 just as it does to the earlier version. Moreover, all portions of Sec 403b are considered qualified plans for purposes of Sec72t.