How Much of a 403(b) Balance Can a Retired Participant Roll Over to an IRA?

Q: A 78-year-old employee of our university just retired. He wanted to roll over his entire 403(b) plan balance to an IRA, but our plan’s recordkeeper told him that the portion of the account balance attributable to his initial Required Minimum Distribution could not be rolled over to an IRA. However, his initial RMD is not due until April 1, 2025. Could he just roll over his entire balance to the IRA and then take an RMD from the IRA before April 1, 2025?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: Unfortunately, no. A participant cannot roll over the entire balance to his IRA because RMDs are not eligible for rollover. While he may delay a distribution until his required beginning date, April 1, 2025, his first RMD is actually due for 2024 (the year he retired). Therefore, if he takes a distribution in 2024, a portion of the distribution will be an RMD, and the participant can only roll his account balance LESS his 2024 RMD amount to an IRA.

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.

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Amy.Resnick@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future column.