403(a) Funds

[Guest JMKirschbaum]

What is the difference between 403(a) funds in a TSA and all the other funds. Is it true that there are TSA amounts that cannot be transferred to another TSA contract?

[mbozek]

403(a) is the designation for a qualified plan that is funded entirely from annuity contracts and does not have a trust. At one time the IRS issued letters indicating that an annuity plan qualified under IRC 403(a) not 401(a) but that has stopped. However, some tax exempt employers who maintain 403(a) annuity plans permitted employees to make contributions by salary reduction under 403(B) to the same annuity contract. So the employee would have an allocation of assets under both types of plans in the same contract. At one time it was important to know the allocation because of 5 year income averaging and the fact that 403(B) assets could not be rolled over to a qualified plan. But there are few differences between the two types of plans now. 403(B) annuity funds can be rolled over to another type of tax deferred plan or can be transferred to another 403(B) annuity contract. see Rev.Rul. 90-24.

[Guest JMKirschbaum]

Thanks for the reply. So, if the 403(a) funds are the same as 403(B) funds do the same restrictions as to transfers apply? I'm looking for the authority that says that even transfers between contracts cannot be made unless there's a termination of employment (or, presumably, some other distributable event). That is a tighter restriction than on the 403(B) funds.

[mbozek]

IRC 403(B)(11) restricts the distribution of salary reduction amounts to death, age 59 1/2, termination , disability or hardship. Tax free exhange can be made under rr90-24 any time.