Publication 571 - Tax-Sheltered Annuity Plans (403(B) Plans) For Employees Of Public Schools And Certain Tax-Exempt Organizations Page 25

for the rollover, would be taxable. The rollover

your plan will not withhold tax on the distribution

plan to a traditional IRA or another 403(b) plan.

must be completed by the 60th day following the

if you choose it.

For more information on the treatment of an

day on which you receive the distribution. For

interest received under a QDRO, see Publica-

Withholding. If you receive a distribution that

information on eligible retirement plans, see

tion 575.

qualifies to be rolled over, the payer must with-

Publication 575.

hold 20% of it for taxes (even if you plan to roll

Spouses of deceased employees. If you are

Hardship exception to rollover rules. For

the distribution over). You cannot choose to

the spouse of a deceased employee, you can

years beginning after 2001, the IRS may waive

have no withholding unless you elect the direct

roll over the qualifying distribution attributable to

the 60-day rollover period if the failure to waive

rollover option.

the employee. You can make the rollover to any

such requirement would be against equity or

eligible retirement plan. You cannot roll it over to

good conscience, including cases of casualty,

Distribution received by you. If you receive

a Roth IRA.

disaster, or other events beyond the reasonable

a distribution that qualifies to be rolled over, you

If after you roll over money and other prop-

control of the individual.

can roll over all or any part of the distribution.

erty from a 403(b) plan to an eligible retirement

Generally, you will receive only 80% of the distri-

plan, you take a distribution from that plan, you

Rollovers to and from 403(b) plans. Effec-

bution because 20% must be withheld. If you roll

will not be eligible to receive the capital gain

tive for distributions after 2001, you can roll over,

over only the 80% you receive, you must pay tax

treatment or the special averaging treatment for

tax free, all or any part of a distribution from an

on the 20% you did not roll over. You can re-

the distribution.

eligible retirement plan to a 403(b) plan. Addi-

place the 20% that was withheld with other

tionally, you can roll over, tax free, all or any part

money within the 60-day period to make a 100%

Second rollover. If you roll over a qualifying

of a distribution from a 403(b) plan to an eligible

rollover.

distribution to a traditional IRA, you can, if cer-

retirement plan. For information on eligible re-

tain conditions are satisfied, later roll the distri-

tirement plans, see Publication 575.

Voluntary deductible contributions. For tax

bution into another 403(b) plan. For more

If after you roll over money and other prop-

years 1982 through 1986, employees could

information, see IRA as a holding account (con-

erty from a 403(b) plan to an eligible retirement

make deductible contributions to a 403(b) plan

duit IRA) for rollovers to other eligible plans, in

plan, you take a distribution from that plan, you

under the individual retirement arrangement

Publication 590.

will not be eligible to receive the capital gain

(IRA) rules instead of deducting contributions to

treatment or the special averaging treatment for

a traditional IRA.

Frozen deposits. The 60-day period usually

the portion of the rollover attributable to the

If you made voluntary deductible contribu-

allowed for completing a rollover is extended for

distribution from the 403(b) plan.

tions to a 403(b) plan under these traditional IRA

any time that the amount distributed is a frozen

For more information on rollovers and eligi-

rules, the distribution of all or part of the accumu-

deposit in a financial institution. The 60-day pe-

ble retirement plans, see Publication 575.

lated deductible contributions may be rolled over

riod cannot end earlier than 10 days after the

Eligible retirement plans. The following

assuming it otherwise qualifies as a distribution

deposit ceases to be a frozen deposit.

are considered eligible retirement plans.

you can roll over. Accumulated deductible con-

A frozen deposit is any deposit that on any

•

tributions are the deductible contributions plus

day during the 60-day period cannot be with-

Individual retirement arrangements.

income and gain allocable to the contributions,

drawn because:

•

Qualified plans.

minus expenses and losses allocable to the con-

1) The financial institution is bankrupt or in-

•

tributions, and minus distributions from the con-

403(b) plans.

solvent, or

tributions, income, or gain.

•

457 plans.

2) The state where the institution is located

Excess employer contributions. The portion

has placed limits on withdrawals because

Nonqualifying distributions. You cannot

of a distribution from a 403(b) plan transferred to

one or more banks in the state are (or are

roll over tax free:

a traditional IRA that was previously included in

about to be) bankrupt or insolvent.

income as excess employer contributions (dis-

•

Minimum distributions (generally required

cussed earlier) is not an eligible rollover distribu-

to begin at age 70

tion.

•

Substantially equal payments over your

Its transfer does not affect the rollover treat-

Gift Tax

life or life expectancy,

ment of the eligible portion of the transferred

amounts. However, the ineligible portion is sub-

•

Substantially equal payments over the

ject to the traditional IRA contribution limits and

If, by choosing or not choosing an election, or

joint lives or life expectancies of your ben-

may create an excess IRA contribution subject

option, you provide an annuity for your benefi-

eficiary and you,

to a 6% excise tax (see chapter 1 of Publication

ciary at or after your death, you may have made

•

Substantially equal payments for a period

590).

a taxable gift equal to the value of the annuity.

of 10 years or more, or

Qualified Domestic Relations Order. You

Joint and survivor annuity. If the gift is an

•

Hardship distributions.

may be able to roll over tax free all or any part of

interest in a joint and survivor annuity where only

an eligible rollover distribution from a 403(b)

you and your spouse have the right to receive

Direct rollovers for 403(b) plan distributions.

plan that you receive under a qualified domestic

payments, the gift will generally be treated as

You have the option of having your 403(b) plan

relations order (QDRO). If you receive the inter-

qualifying for the unlimited marital deduction.

make the rollover directly to the IRA or new plan.

est in the 403(b) plan as an employee’s spouse

Before you receive a distribution, your plan will

or former spouse under a QDRO, all of the

More information. For information on the gift

give you information on this. It is generally to

rollover rules apply to you as if you were the

tax, see Publication 950, Introduction to Estate

your advantage to choose this option because

employee. You can roll over your interest in the

and Gift Taxes.

Chapter 12 Distributions and RolloversRolloversDistributions:

Page 25

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