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millie

Mandatory Withdrawal From 403(b)

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Two employees in our organization, one age 71 and one about to turn 70. Both are working -- one full time and one 60% time. The one who is about to turn 70 was told by her broker that she needs to start mandatory withdrawal from her 403(b) or else she will suffer tax consequences. My understanding is that as long as an employee is working, they can contribute new money into their 403(b) and not be subject to the mandatory withdrawal at age 701/2. Only one article I saw said that mandatory withdrawal occurs only when a person reaches the age of 70 1/2 or retires, whichever comes last. I believe this to be true. Can anyone tell me if I'm correct? Thanks.

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Hey Millie,

 

You are correct. If you are still working, you can delay withdrawal from your 403(b) until April 1 following the year in which you retire. I guess the question I would have, and hopefully Michael Devault or others will jump in on this, does part time status have any bearing on this? I have never heard that it does.

 

Dan Otter

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I also have a question related to mandatory withdrawals when I am 70 1/2. I plan on working until age 75 and I have been told that I do not have to take minimum required distributions on my CURRENT employer's 403b plan as long as I am still working. But, I am still required to take the MRD of my past employer's retirement plans (403b/401k) and IRA's. Can I consolidate my other retirement plans (past 403b/401k plans and IRA's) into my current employers 403b plan so I can avoid taking an MRD from those plans as well?

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I also have a question related to mandatory withdrawals when I am 70 1/2. I plan on working until age 75 and I have been told that I do not have to take minimum required distributions on my CURRENT employer's 403b plan as long as I am still working. But, I am still required to take the MRD of my past employer's retirement plans (403b/401k) and IRA's. Can I consolidate my other retirement plans (past 403b/401k plans and IRA's) into my current employers 403b plan so I can avoid taking an MRD from those plans as well?

 

yes, but you must make the transfer before January 1 of the year you attain age 70 1/2. The reason you can avoid the MRD rules on the other accounts is that the MRD for any plan, e.g., 401k, 403b, IRA, depends on the account balance as of 12/31 of the prior year. If the account balance for any plan as of 12/31 of the year prior to the year that you attain 70 1/2 is 0 then the MRD for the year in which you attain 70 1/2 is 0.

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I also have a question related to mandatory withdrawals when I am 70 1/2. I plan on working until age 75 and I have been told that I do not have to take minimum required distributions on my CURRENT employer's 403b plan as long as I am still working. But, I am still required to take the MRD of my past employer's retirement plans (403b/401k) and IRA's. Can I consolidate my other retirement plans (past 403b/401k plans and IRA's) into my current employers 403b plan so I can avoid taking an MRD from those plans as well?

 

yes, but you must make the transfer before January 1 of the year you attain age 70 1/2. The reason you can avoid the MRD rules on the other accounts is that the MRD for any plan, e.g., 401k, 403b, IRA, depends on the account balance as of 12/31 of the prior year. If the account balance for any plan as of 12/31 of the year prior to the year that you attain 70 1/2 is 0 then the MRD for the year in which you attain 70 1/2 is 0.

 

Thanks Intruder, that is what I thought. Do you happen to know where I can reference this on the IRS's website or do you happen to have any articles regarding this?

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I also have a question related to mandatory withdrawals when I am 70 1/2. I plan on working until age 75 and I have been told that I do not have to take minimum required distributions on my CURRENT employer's 403b plan as long as I am still working. But, I am still required to take the MRD of my past employer's retirement plans (403b/401k) and IRA's. Can I consolidate my other retirement plans (past 403b/401k plans and IRA's) into my current employers 403b plan so I can avoid taking an MRD from those plans as well?

 

 

yes, but you must make the transfer before January 1 of the year you attain age 70 1/2. The reason you can avoid the MRD rules on the other accounts is that the MRD for any plan, e.g., 401k, 403b, IRA, depends on the account balance as of 12/31 of the prior year. If the account balance for any plan as of 12/31 of the year prior to the year that you attain 70 1/2 is 0 then the MRD for the year in which you attain 70 1/2 is 0.

 

 

Thanks Intruder, that is what I thought. Do you happen to know where I can reference this on the IRS's website or do you happen to have any articles regarding this?

 

 

See Reg 1.409(a)(9)-5 Q/A-1(a).

 

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