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apteacher

403b Transfer To An Ira

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My wife has 403b accounts with Fidelity and Vanguard. Vanguard has not been an option for a few years, so that account is inactive. She has been contributing to Fidelity the last few years, but that will not be an option after January 1. So, after January 1, both accounts will be inactive.

 

Simple question: Can she create a new traditional IRA account with Vanguard and then transfer to that account her 403b money from Fidelity and Vanguard?

 

If this matters, she is still employed by the same school district and she is 49 years old.

 

I'm really looking for some help here. I would like to consolidate these accounts that have been orphaned through changes in policy.

 

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Hi AP,

I don't see any tax or other advantage to coverting the 403b in Fidelity to a non traditional IRA or that you can even do this. IF all you want to do is transfer to consolidate and since Fidelity or VG are not in your wife's SD plan, transfer the money from Fidelity to VG. I believe she can do this even under the new rules since the money is already there.

Regards,

Steve

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AP --

Not to be too smart about this, but call the IRA division at Vanguard and ask them to set this up for you. If they say no, call the 403b division and ask THEM to set up the IRA. I have found Vanguard to be legally very conservative, so they will do this only if their legal beagles perceive no risk to them -- or to you, for that matter.

 

JudyS

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AP --

Not to be too smart about this, but call the IRA division at Vanguard and ask them to set this up for you. If they say no, call the 403b division and ask THEM to set up the IRA. I have found Vanguard to be legally very conservative, so they will do this only if their legal beagles perceive no risk to them -- or to you, for that matter.

 

JudyS

 

Thank you, Judy. Actually, that is just what I did, and Vanguard said that transferring money from a 403b to an IRA was legal. I just wanted to hear confirmation from some of the professionals on this forum.

 

Dan? Scotty? Hey, how about TR? :)

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AP, Judy,

What am I missing? What is the advantage of doing this?

Steve

 

Steve,

 

I simply want to consolidate my wife's 403b accounts into one IRA. The problem with this !@#$ed 403b thing is that providers come and providers go. So my wife had a Vanguard account and, bam, Vanguard was no longer on her district's approved list. Then she went to Fidelity and, bam, Fidelity is no longer on her approved list. Now she is going to start an account with CalSTRS, but gosh knows how long that will last.

 

Between the two of us, I don't want 403b accounts all over the place, so I would like to do some consolidation, and that is why I want to fold my wife's inactive 403b accounts into one IRA account. I simply don't know for sure if this is legal, although two people at Vanguard assured me that it is. I just want to get confirmation from some people on this forum.

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AP,

 

I understand the goal of consolidation. I don't see how the new regs are obstacles in this situation. Your wife has money in Fidelity now and you want to consolidate. Doesn't matter if Fidelity is in the plan, if fact, it’s a good thing they are not and so you can transfer that money as a 403b to Vanguard. I don't see any advantage of using an IRA to transfer, that’s my main point. Besides, your wife is not old enough to convert the 403b into a rollover IRA. Of course, future money will be directly affected by the new regs, but in this case its “old” money.

 

BTW, anybody over 59.5 can transfer their 403b into any company NOT on the SD’s list according to the new regs. But you have to convert the 403b into a rollover IRA. After 59.5, it definitely is an advantage to use the IRA and it’s an advantage to be 59.5 or older.

 

Have a good day,

Steve

 

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My wife has 403b accounts with Fidelity and Vanguard. Vanguard has not been an option for a few years, so that account is inactive. She has been contributing to Fidelity the last few years, but that will not be an option after January 1. So, after January 1, both accounts will be inactive.

 

Simple question: Can she create a new traditional IRA account with Vanguard and then transfer to that account her 403b money from Fidelity and Vanguard?

 

If this matters, she is still employed by the same school district and she is 49 years old.

 

I'm really looking for some help here. I would like to consolidate these accounts that have been orphaned through changes in policy.

 

 

403b funds can be rolled over to an IRA if a distribution event has occured. Distribution events include termination of employment from the employer sponsoring the 403b plan and age 59 1/2. The only other option for a rollover is if the 403b plan is terminated under the IRS regs and all benefits are distributed within a reasonable time after termination of the plan.

 

What distribution event has occurred?

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403b funds can be rolled over to an IRA if a distribution event has occured. Distribution events include termination of employment from the employer sponsoring the 403b plan and age 59 1/2. The only other option for a rollover is if the 403b plan is terminated under the IRS regs and all benefits are distributed within a reasonable time after termination of the plan.

 

What distribution event has occurred?

 

And this is the problem I am having. The form that Vanguard sent me ("Single Distribution ...") basically reinforces what Intruder is saying, i.e., that there has been no distribution event. On the other hand, Steve and Vanguard representatives themselves are saying that it is legal to do this.

 

Steve,

 

My frustration is that, while the new regs may not prevent this type of transfer (but do old regs do so? I am completely baffled.), the new regs have led districts to drop great vendors like Vanguard and Fidelity. And this has led me to look for ways to consolidate, and that seems to be problematic.

 

All,

 

So again, my question is, if Fidelity is no longer on the approved list, can I transfer her money into a new IRA?

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403b funds can be rolled over to an IRA if a distribution event has occured. Distribution events include termination of employment from the employer sponsoring the 403b plan and age 59 1/2. The only other option for a rollover is if the 403b plan is terminated under the IRS regs and all benefits are distributed within a reasonable time after termination of the plan.

 

What distribution event has occurred?

 

And this is the problem I am having. The form that Vanguard sent me ("Single Distribution ...") basically reinforces what Intruder is saying, i.e., that there has been no distribution event. On the other hand, Steve and Vanguard representatives themselves are saying that it is legal to do this.

 

Steve,

 

My frustration is that, while the new regs may not prevent this type of transfer (but do old regs do so? I am completely baffled.), the new regs have led districts to drop great vendors like Vanguard and Fidelity. And this has led me to look for ways to consolidate, and that seems to be problematic.

 

All,

 

So again, my question is, if Fidelity is no longer on the approved list, can I transfer her money into a new IRA?

 

 

AP:

 

While the tax law permits a rollover of 403b funds to an IRA as the VG reps have stated, VG reps do not know if an distribution event has occured because that depends on the employee's own situation.

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AP:

While the tax law permits a rollover of 403b funds to an IRA as the VG reps have stated, VG reps do not know if an distribution event has occured because that depends on the employee's own situation.

 

 

Intruder,

 

I explained the situation to the Vanguard reps. Two of them stated that I could make the transfer. "Distribution event" was never brought up either by me or the reps. Both said that since Fidelity is no longer an option with my wife's employer, that was enough to make the transfer.

 

So, do you think that my wife can legally make the transfer without causing legal/tax problems? Honestly, I don't know what to think.

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This just in from the LAUSD letter that Steve posted:

 

"Rolling your funds into an IRA is an option only available to former

employees and current employees who are at least 59.5 years of age."

 

This seems to confirm what Intruder is suggesting, but contradicts what the folks at Vanguard are saying.

I think that I will just let my wife's inactive 403b accounts stay where they are.

 

I did call the IRS for an answer to my question only to find out that they do not answer questions on the phone. They simply took my questions and said that someone will get back to me within 15 days. There is no way of e-mailing a question, either.

 

Do I hear any support for a flat tax system?

 

 

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This just in from the LAUSD letter that Steve posted:

 

"Rolling your funds into an IRA is an option only available to former

employees and current employees who are at least 59.5 years of age."

 

This seems to confirm what Intruder is suggesting, but contradicts what the folks at Vanguard are saying.

I think that I will just let my wife's inactive 403b accounts stay where they are.

 

I did call the IRS for an answer to my question only to find out that they do not answer questions on the phone. They simply took my questions and said that someone will get back to me within 15 days. There is no way of e-mailing a question, either.

 

Do I hear any support for a flat tax system?

 

 

AP:

 

If the LAUSD states that a rollover is only available to former employees and after 59 1/2 then those are the only those events will be reported as a tax free rollover on the 1099-R form which will allow exclusion of the distribution from income tax.

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