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New Rollover Rules


joel

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The trustee-to-trustee transfer method may be used if one wants to use 403b funds for the cost of purchasing prior service credit in a governmental DB plan. Because it is deemed to be a "transfer" and not a "distribution" no triggering event is required. This transaction basically has no time constraints. It simply must be done prior to receiving a DB pension from the governmental plan that will accept the purchase.

Now for the rollover provisions of EGTRRA Sections 641-644:

Tens of thousands of active 403b participants are also accruing benefits under their current employer's qualified 401 plan which includes but is not limited to governmental DB plans. According to EGTRRA Sections 641-644 one may rollover 403b funds to a 401 plan. In a practical sense, how could a rollover, which requires a distribution event, ever take place if the 403b holder must first satisfy a triggering event of: death, disability, separation from service or the attainment of age 59.5? Upon "death", one for an obvious reason cannot effectuate a rollover. Upon becoming "disabled" a rollover to the employer's 401 plan may not be allowed because the plan may require active status. The same holds true upon "separation from service". The 4th and last triggering event that allows for a distribution and, thus, a rollover is attainment of "age 59.5". But once again, the employee must be active at age 59.5 if he chooses to rollover his 403b funds to the employer's 401 plan.

I understand the IRS is having some trouble in effectuating the rollover rules authorized under EGTRRA Sections 641-644. Can anyone shed some light on this issue?

Peace,

Joel L. Frank

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The rollover provisions are to help portability upon a change in jobs. The ability to rollover from a 403(B) to a 401(a) is for the situation where the new employer has a 401(a) and the old employer has a 403(B). There was never any intention that this would mean there could be rollovers amongst a single employer's plans while a person was active.

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I thought that there was no restriction on an employee starting annuity benefits at any time under a 403(B) plan and that there was no restiction on transferring employer contributions to a 403(B) annuity prior to 59 1/2. If an employee can elect to commence an annuity benefit at any time why isnt it permissible to allow the employee to transfer the funds to a DB plan in order to provide for an increased retirement benefit. Also cant annuities be transferred under RR 90-24. There is enough authority for the IRS to write a rule to facilitate the EGTRRA provisions

mjb

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