“I am currently working on my first required minimum distribution (RMD) transaction with a 403(b). I am familiar with the 401(k) rules, but are there any differences for 403(b) plans?”
Michael A. Webb, vice president, Retirement Practice, Cammack Retirement Group, answers:
Excellent question! Indeed there are some significant differences, mainly due to the fact that the 403(b) rules for RMDs essentially follow the IRA requirements, as opposed to 401(k) and other qualified plan rules, with some modifications. The key differences between 401(k) plan RMDs and the requirements for 403(b) plans are as follows:
1. As is the case with IRAs, if a participant maintains more than one 403(b) account, he/she can total the RMDs from all 403(b) plans, yet withdraw the required minimum amount from only one 403(b) plan. In a 401(k) or other qualified plan, separate distributions are required from each plan. Note however, that accounts for which a participant is a beneficiary cannot be combined with accounts that the participant owned directly.
2. In a rule that is unique to 403(b) plans, 12/31/86 balances are grandfathered from the present RMD rules and instead have their own separate rules that generally delay required distribution until the later of age 75 or April 1 following the year of retirement (see “(b)lines Ask the Experts- Required Minimum Distributions” for more details on this rule).
However ROTH 403(b) distribution rules follow the qualified plan rules with respect to timing (later of April 1 following the attainment of age 70 ½ or retirement) rather than the Roth IRA rules (where distributions are NOT required until after the death of the account owner). Also, unlike an IRA, a spouse cannot treat an inherited 403(b) contract as it were his/her own contract.
Thanks again for your question!
NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.