joel

Belgareth, Is the receiving plan a DC or DB plan? Will the employee have the right to rollover the funds upon his subsequent retirement? Or does he want to be relieved of the RMD for this IRA by subsequently annuitizing the rolled over funds upon retirement? Peace, Joel L. Frank

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

Why not have the new custodian simply return the check instead of depositing it. It seems that should do it. Peace, Joel

Last week, a retired municipal 457 plan employee, age 54, rolled over his 457 plan balance into an IRA...thus becoming subject to the pre age 59 1/2 early withdrawal penalty. Can this be reversed? Or fixed in any way? Thanx, James Jackson A pre-age 59.5 rollover is not subject to the early withdrawal penalty. A rollover is a tax-free transaction regardless of age. There is no need to reverse this transaction. Peace, Joel

From http://www.benefitslink.com/articles/frank000921.shtml -------------------------------------------------------------------------------- Guest Article TSA Access Restrictions as a Bar to Rollovers -------------------------------------------------------------------------------- by Joel L. Frank Under the Internal Revenue Code prior to the Unemployment Compensation Amendments of 1992 ("UCA '92"), a distribution could be rolled over from one 403(B) tax-sheltered annuity ("TSA") to another TSA or to an individual retirement account ("IRA") only if three conditions were met: it was a total distribution or a partial distribution equal to at least 50% of the balance to the credit of the employee, the distribution occurred because of specified triggering events (death, disability, separation from service or attainment of age 59-1/2), and the distribution was rolled over in 60 days. (IRC sections 403(B)(8)(A) through (D), as in effect prior to UCA '92.) UCA '92 simplified the rollover rules for TSAs by eliminating the distinctions between total and partial distributions, eliminating the triggering events upon which a rollover was conditioned, and eliminating the requirement that distributions be made during a single taxable year of the employee. (See IRC sections 403(B)(8)© and 402(a)(5)©, prior to UCA '92.) It is true that UCA '92 did not eliminate certain triggering conditions found in the Code that by their terms specifically apply to distributions from a section 403(B) custodial account or annuity contract. (IRC sections 403(B)(7)(A)(ii) and 403(B)(11).) But TSA providers continue to improperly apply those 403(B) distribution triggering conditions to the 403(B) owner's eligibility to make a rollover to another TSA. This was clearly not the intent of UCA '92! IRC section 403(B)(7)(A)(ii), applicable to 403(B) custodial accounts, provides, in pertinent part: IRC section 403(B)(11) imposes similar conditions on distributions from 403(B) annuity contracts. Is it not ludicrous to require a 403(B) owner to show that he or she has met one of these "paid or made available" events (death, disability, separation from service, attainment of age 59-1/2 or hardship 1/ when all the participant wishes to do is rollover the funds to another TSA that, by law, will be subject to those same "paid or made available" conditions? Is this not the very reason UCA '92 eliminated the specified triggering events of death, disability, separation from service or attainment of age 59-1/2, which previously were required for the making of a valid rollover? This construction of the Code by TSA providers unjustly denies rollover rights. The Senate soon will take up the Retirement Security and Savings Act of 2000. This would be an ideal place to enact a clarification that the early distribution triggering conditions of Code sections 403(B)(7)(A)(ii) and 403(B)(11) do not apply to rollover distributions. -------------------------------------------------------------------------------- 1/ Hardship distributions are no longer eligible for rollover treatment. See Code sections 402©(4) and 403(B)(8)(B), as amended by the Internal Revenue Service Restructuring and Reform Act of 1998. -------------------------------------------------------------------------------- Joel L. Frank PO Box 148 Marlboro, New Jersey 07746-0148 (732) 536-9472 rollover@optonline.net

A non-spouse beneficiary of a tax-deferred account has the option of stretching out distributions from the account based on his/her own life expectancy beginning at the age that he/she inherited the account. This distribution method stretches out the tax liability over many years if not decades into the future.

The devil is surely in the detail. Carol, in my humble opinion the reason the IRS is having so much trouble with this is the fact that effective in 2002 the law allows a 403(B) "rollover" contribution to a 401(a) Plan. The only reason to effectuate such a rollover distribution is for the purchase of prior service credit. This is done prior to retirement and while in-active status. But the IRS has taken the position that a triggering event under 403(B)(7) and (B)(11) must be satisfied before a distribution and, thus, a rollover can take place. This is hardly the case with the alternative method of purchasing prior service---cut a personal check or sign up for payroll deductions. If the Service rules, as it should, that the triggering events of 403(B)(7) and (B)(11) do not apply to rollovers to a 401(a) plan then it will have to take the same position when it comes to rollovers from 403(B) to another 403(B) or an IRA. This is the position that the CCH as well as other practitioners took way back in 1992 when the UCA of 1992 eliminated the specified distribution triggering events for rollover distributions under 403(B)(8).

RR 90-24 does not differentiate between a salary reduction only plan from one that includes an employer match. Any and all restrictions from effectuating a 90-24 transfer comes solely from the Plan Document and not the Ruling. It is the rare salary- reduction-only-plan that places restrictions on a 90-24 transfer. On the other hand, it is the rare employer-match-plan that places no restrictions on a transfer. Peace, Joel L. Frank

Carol----thank you very much for all you do. Peace, Joel L. Frank

May a State or Local public employee pension fund operate a 457 plan?

Note, Revenue Ruling 90-24 is not limited to in-service employees younger than 59 1/2. All employees regardless of employment status or age may utilize the Ruling. In fact, because IRS reporting is not required, it is the method of choice for effectuating tax-free distributions among 403(B) funding mediums.

The military benefit should only be a floor because the victims were in reality non-combatants and left totally defenseless.

The victims of the WTC attack should be treated as killed or wounded in action. What are the military benefits for the survivors of one killed/wounded in action?

For years beginning after 12-31-01 a taxable loan taken at retirement is now an eligible rollover distribution subject to mandatory 20% withholding if not directly rolled over to an IRA or other qualified plan. What body authorized this new rule? Please cite the authority. Are any plans exempt from this new rule? Peace, Joel L. Frank

For years beginning after 12-31-01 a taxable loan taken at retirement is now an eligible rollover distribution subject to mandatory 20% withholding if not directly rolled over to an IRA or other qualified plan. What body authorized this new rule? Please cite the authority. Are any plans exempt from this new rule? Peace, Joel L. Frank

I have long taken the view that the triggering events enumerated in sections 403(B)(7)(A)ii and 403(b)11 have NO application to rollover treatment but rather list the earliest date upon which a participant may make a TAXABLE distribution. Apparently I am not alone. In fact, I am in very sound company! Following is an exact quote from "Tax Focus/September 16, 1992". This is a publication of "Standard Federal Tax Reports" published and researched by "CCH" the topical law publishers. Here is the quotation: ..."NEW ROLLOVER RULES: By eliminating the key requirements that currently exist as a condition for rollover treatment, Congress has taken significant steps to make it easier for individuals to keep their retirement assets in a retirement vehicle. Specifically, the Unemployment Compensation Amendments (UCA) of 1992 eliminated the distinctions between total and partial distributions, the mandatory triggering events, and the one-year distribution requirement for total distributions. After December 31, 1992, any portion or all of a distribution from a qualified plan or tax sheltered annuity plan (other than a minimum distribution, generally required to begin after age 70.5,) can be rolled over tax-free to another qualified plan, tax sheltered annuity, or IRA with only the following conditions: (1) it must be rolled over in 60 days, and (2) it cannot be one of a series of substantially equal periodic payments (not less frequently than annually) made (i) over the life or joint life expectancies of the participant and his beneficiary or (ii) over a specified period of ten years or more. In short, with the exception of required distributions, nonannuity distributions generally may be rolled over, regardless of the amount or reason for the distribution." COMMENTARY: The eliminated mandatory triggering events referred to in the first paragraph can be found under section 403(B)8 prior to January 1, 1993. CCH recognized, along with other practitioners, that effective January 1, 1993 these mandatory triggering events for rollover purposes was repealed. Thus, it is wrong to apply the triggering events under 403(B)(7)(A)ii and 403(b)11 to eligibility for rollover treatment. Peace, Joel L. Frank

POST YOUR 403B QUESTIONS, THOUGHTS AND COMMENTS... Go to Top | New Topic | Go to Topic | Search Subject: 403(B) rollover rules (not a 90-24 transfer) Author: Joel L. Frank Date: 12/24/2001 5:35 pm PST I have long taken the view that the triggering events enumerated in sections 403(B)(7)(A)ii and 403(b)11 have NO application to rollover treatment but rather list the earliest date upon which a participant may make a TAXABLE distribution. Apparently I am not alone. In fact, I am in very sound company! Following is an exact quote from "Tax Focus/September 16, 1992". This is a publication of "Standard Federal Tax Reports" published and researched by "CCH" the topical law publishers. Here is the quotation: ..."NEW ROLLOVER RULES: By eliminating the key requirements that currently exist as a condition for rollover treatment, Congress has taken significant steps to make it easier for individuals to keep their retirement assets in a retirement vehicle. Specifically, the Unemployment Compensation Amendments (UCA) of 1992 eliminated the distinctions between total and partial distributions, the mandatory triggering events, and the one-year distribution requirement for total distributions. After December 31, 1992, any portion or all of a distribution from a qualified plan or tax sheltered annuity plan (other than a minimum distribution, generally required to begin after age 70.5,) can be rolled over tax-free to another qualified plan, tax sheltered annuity, or IRA with only the following conditions: (1) it must be rolled over in 60 days, and (2) it cannot be one of a series of substantially equal periodic payments (not less frequently than annually) made (i) over the life or joint life expectancies of the participant and his beneficiary or (ii) over a specified period of ten years or more. In short, with the exception of required distributions, nonannuity distributions generally may be rolled over, regardless of the amount or reason for the distribution." COMMENTARY: The eliminated mandatory triggering events referred to in the first paragraph can be found under section 403(B)8 prior to January 1, 1993. CCH recognized, along with other practitioners, that effective January 1, 1993 these mandatory triggering events for rollover purposes was repealed. Thus, it is wrong to apply the triggering events under 403(B)(7)(A)ii and 403(b)11 to eligibility for rollover treatment. Peace, Joel L. Frank Reply To This Message Previous Message | Next Message Topics Author Date 403(B) rollover rules (not a Rev. Ruling 90-24 transfer) Joel L. Frank 12/24/2001 5:35 pm PST Previous Topic | Next Topic Reply To This Message Your Name: Your Email: Subject: Email replies to this thread, to the address above.

What section of the Code permits a for profit enterprise to offer a 403(B)?

It all depends on your state's Retirement Law----there is no national standard.

John Doe inherits his sister Mary Doe's IRA. How does the new account registration read?

When was the term "Minimum Required Distribution" officially changed to "Required Minimum Distribution? Please cite the authority. Peace, Joel L. Frank

Are the employees also covered by a public employee retirement system? Peace, Joel L. Frank

What about the other employees? Do they have a 403b of their own? Does it also provide for an employer match?

POST YOUR 403B QUESTIONS, THOUGHTS AND COMMENTS... Go to Top | New Topic | Go to Topic | Search Subject: Convert 403b to 401k Author: Brad Date: 10/17/2001 11:18 am PST I am a third party administrator who is trying to consult a client on the advantages of switching their company's entire retirement plan from a 403(B) structure to a 401(k) structure. I am not dealing with an individual participant who wants to roll their money into a 401(k); I am talking about restating the entire Plan to switch it's structure over to a 401(k). Do you have any advice or information that would be beneficial to me in this endeavor? What I am really looking for is a precise comparison chart (or something of that sort) that I could use to communicate the advantages or disadvantages of making the switch. Reply To This Message Previous Message | Next Message Topics Author Date Convert 403b to 401k Brad 10/17/2001 11:18 am PST Previous Topic | Next Topic Reply To This Message Your Name: Your Email: Subject: Email replies to this thread, to the address above.

Dynalow, Please clarify your last sentence. Thanks, JLF