(b)lines Ask the Expert – Rollover Clarification

May 20, 2008 ((b)lines) - An adviser asks: "Based on the final 403(b) regs it appears the IRS will no longer allow direct rollovers from a 403(b) to another plan of any kind nor a direct rollover into the 403(b) plan, unless it is another 403(b) or a rollover IRA. What is the effective date of this provision and is my interpretation correct?"

The final 403(b) regulations continue to allow rollovers into a 403(b) from any other “eligible retirement plan.”  (See Treasury Regulation section 1.403(b)-10(d).)  An “eligible retirement plan” is defined in the Internal Revenue Code as an IRA, qualified plan, 403(b), or governmental
457(b) plan. 

The final regulations also continue to allow rollovers to any other “eligible retirement plan.” 

As such, the final regulations continue to preserve the flexible rollover rules (as tweaked by the Pension Protection Act) permitted since EGTRRA.  One item to note is that there are special rules that apply to after-tax rollovers (i.e., generally only permitted to 401(a) or 403(b) plans that agree to separately track after-tax amounts) and to rollovers of Roth 403(b) funds to Roth accounts in 401(k) and 403(b) plans or Roth IRAs (i.e., there is some ambiguity as to whether an
employee earning in excess of the Roth IRA income limits is permitted to roll over his or her Roth 403(b) contributions to a Roth IRA, although PPA technical corrections may resolve this ambiguity).

David Levine, Groom Law Group, Chartered

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.