(b)lines Ask the Experts – Rollover of Active Accounts from 403(b) to 401(k)

July 31, 2012 (PLANSPONSOR (b)lines) – “Prior to 2009, we maintained two plans:  a 403(b) deferral-only plan and a separate profit sharing plan that received employer contributions.

“Effective January 1, 2009, we added a 401(k) feature to the profit sharing plan and no further 403(b) contributions were made on or after that date.  Can we now allow 403(b) accounts to be rolled over into the 401(k) if an employee with a 403(b) account is still employed by our organization?”    

David N. Levine, Groom Law Group, answered:  

Although your 403(b) “plan” may not have been subject to the Internal Revenue Code written plan document rules that went into effect in 2009 because of the IRS transition rules in Revenue Procedure 2007-71, your plan is still subject to the 403(b) plan rules that govern the timing of distributions unless the plan has been terminated (which the Experts cannot tell from your question).    

As such, to be eligible to roll over their 403(b) accounts to the 401(k)/profit sharing plan, employees will need to have either (1) had a severance from employment that allows them to take a distribution under the terms of their annuity contracts and/or custodial accounts or (2) reached a permissible “in-service” distribution event (for example, reaching age 59-1/2) that is both specified under the terms of their annuity contracts and/or custodial account and that is consistent with the applicable distribution requirements set forth in Code section 403(b).  


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.