(b)lines Ask the Experts – Is a 1099-R Issued for 403(b) Plan-to-Plan Transfers?

“In transferring from one 403(b) plan to another 403(b) plan, is a 1099-R issued to the individual?”

Stacey Bradford, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:

No. The transaction for moving funds from one 403(b) plan to another, that is known as a “plan-to-plan transfer,” does NOT involve a distribution of plan assets. Only distributions are reportable on a 1099-R, and thus, a 403(b) plan-to-plan transfer is NOT reportable on a 1099-R. If a recordkeeper issues a 1099-R for a 403(b) plan-to-plan transfer, it is doing so in error.

However, it should be noted that a 403(b) plan-to-plan transfer is a fairly infrequent event, since one of the requirements for such a transfer is that both the transferring 403(b) plan and the recipient 403(b) plan must permit plan-to-plan transfers, which is often not the case (for details, as well as other potential issues with such transfers, see our previous Ask the Experts column on this subject).

A far more common method of moving funds from one 403(b) plan to another is via a rollover, either direct or indirect, which is only permitted after the participant is otherwise eligible for a distribution. Since a rollover involves a distribution of plan assets, a 1099-R is indeed issued for a rollover. Rollovers also have the added flexibility of being able to be made to a qualified plan such as a 401(k) plan, or an IRA; a 403(b) plan-to-plan transfer can only be made to another 403(b) plan.

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.