(b)lines Ask the Experts – Roth Conversion Without Qualifying for Distribution

I am a participant in a 403(b) plan.

“I wanted to convert my 403(b) balance to a Roth, but my benefits person informed me that, since I did not qualify for a distribution under the plan, I could not complete a Roth conversion. Is this true?” 

David Powell, with Groom Law Group, answers:  

This is an example of a question where the answer may have changed because there was a change in the law. 

It is true that for some time in-plan Roth conversions where not permissible unless the participant was eligible for a distribution under the terms of the plan (which is often not before age 59 and 1/2 or normal retirement age), but that rule was changed by the American Taxpayer Relief Act of 2012 effective for conversions of vested amounts after 2012. 

However, it is still not possible to do such an in-plan Roth conversion if the plan document does not permit them, or if ongoing Roth contributions are not permissible. The plan could be amended to permit such Roth conversions, but not all plan sponsors have done so—some out of inertia, but sometimes for other reasons, such as not to complicate administration. But you could ask your employer to consider making the change.

Thank you 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.  

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