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Compliance May 20, 2008
(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?"
Reported by PS
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.