403(b) Distributions

[Nassau]

If an employee changes classification from regular FT to per diem status and is under age 59 1/2, does this initiate a qualified distribution whereby the participant would be eligible to distribute money from the vested portion of an employer contribution source?

[J Simmons]

It might be a 'severance from employment' (ceasing to be an employee of the plan-sponsoring employer). Is this a full-time teacher paid a salary that is now going to go into the 'substitutes' pool, and only called up for a day (and paid a per diem) when needed? If so, then employment has likely ended. On the other hand, if the change is to give the employee a greater flexibility in scheduling (working most, but not all), then employment might not have severed. See Treas Reg 1.403(b)-2(b)(19), 1.401(k)-1(d), and 1.403(b)-6(h).