(b)lines Ask the Expert – 403(b) Deferrals to Roth Deferrals

March 24, 2009 (PLANSPONSOR (b)lines) - Can pre-tax 403(b) accounts be rolled over into a new plan as Roth after-tax deferrals?

A plan adviser explains: ” A sponsor established a new 403(b) plan on 1/1/2009. The new plan allows for pre-tax 403(b) deferrals; Roth 403(b) deferrals; and non-elective contributions. The plan allows for rollovers.

Can a participant rollover their existing pre-tax 403(b) account into the Roth 403(b) account with the new plan?” 

Answer:    No, conversions from pre-tax to Roth after-tax contribution status are only permitted in the IRA context.  A 403(b) plan cannot permit the conversion of pre-tax funds to Roth after-tax funds inside the 403(b) plan. However, it may be possible (subject to income limits in 2009) to convert a 403(b) plan distribution into a Roth IRA when it is distributed from the 403(b) plan.

-David Levine, Groom Law Group, Chartered

NOTE: This feature is to provide general information only, does not constitute legal advice as part of an attorney-client relationship, and cannot be used or substituted for legal or tax advice.