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403b To Traditional Ira Rollover

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Just spoke with the IRS rep for a second time, and he confirmed that even though my wife has not turned 59 1/2, been terminated from employment, or meet any of the other conditions constituting a distributable event, she CAN roll over the money in a 403b to a traditional IRA.

 

The key to this is to make sure that she does not take possession of the money. The money is rolled over from the current trustee of her 403b account to the trustee of the vendor for the traditional IRA.

 

 

 

 

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Just spoke with the IRS rep for a second time, and he confirmed that even though my wife has not turned 59 1/2, been terminated from employment, or meet any of the other conditions constituting a distributable event, she CAN roll over the money in a 403b to a traditional IRA.

 

The key to this is to make sure that she does not take possession of the money. The money is rolled over from the current trustee of her 403b account to the trustee of the vendor for the traditional IRA.

 

That's interesting. I wanted to do exactly the same thing for my wife's 403(b) and was told that as long as she is still employed by the same district, she can only transfer to another 403(b) that is on the district's vendor list.

 

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Just spoke with the IRS rep for a second time, and he confirmed that even though my wife has not turned 59 1/2, been terminated from employment, or meet any of the other conditions constituting a distributable event, she CAN roll over the money in a 403b to a traditional IRA.

 

The key to this is to make sure that she does not take possession of the money. The money is rolled over from the current trustee of her 403b account to the trustee of the vendor for the traditional IRA.

 

 

 

 

Very interesting. Did they provide any reasoning, or clarify under what rule or provision WHY this would be allowed?

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Very interesting. Did they provide any reasoning, or clarify under what rule or provision WHY this would be allowed?

 

The rep said that since my wife is not actually taking possession of the money, the transfer could be made. The money would be going from one tax-deferred account to another. He did not specify a rule or provision, but he said that he did talk it over with some others, and they agreed.

 

Really, what is the difference here? She is not trying to pull a fast one by taking distributions without paying taxes and penalties. She is not taking possession of the money. She will not even see a check. In fact, the rep said that the 403b company should send the check to the trustee of the IRA company made out to "For the Benefit of" my wife.

 

 

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go to www.irs.gov which is the irs website. Hit the tab for retirement plans community, under topics in the left column hit EP FAQ, then find 5.3 types of plans, hit tax sheltered annuities find Q 7.

 

Thanks! It's just too bad that the news is not better.

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Here's the text from the IRS site from http://www.irs.gov/retirement/article/0,,id=96975,00.html#7 :

 

I know that the rollover rules for TSA rollovers were liberalized a few years ago. I am 35 years old and still working. I know of a really good investment opportunity and would like to roll a portion of my TSA into an Individual Retirement Account (IRA) so I can take advantage of this opportunity. Can I roll a portion of my TSA into an IRA so I can direct the investment?

 

A rollover from a TSA to an IRA may be permitted if there has been a distributable event. A distributable event would include death, disability, separation from service, hardship or attainment of age 59 ½ . Since you have not separated from service and are not age 59 ½ it does not appear that you have a distributable event. In such circumstances, a rollover from the TSA to an IRA would be an improper distribution and could have taxable consequences. A hardship distribution is not qualified for rollover treatment under any circumstances.

 

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I am not saying that I am correct about making the roll over from a 403b to a traditional IRA. I am, however, saying that, after two phone calls with the IRS, the IRS rep said that it can be done without any penalties. In the second conversation, I made specific reference to publication 571 and "distributable events," and was still told that the roll over can be done without penalties.

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Understood.

 

So, how reliable is the source providing this answer - does being an IRS agent does make the answer true? If one agent says over the phone "it's okay", does that prevent a future IRS auditor from disqualifying the assets (making it immediately taxable)?

 

I asked my son what he thought that was starting to grow on my chin. He touched it and looked closely, paused, then said, "Grass."

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Understood.

 

So, how reliable is the source providing this answer - does being an IRS agent does make the answer true? If one agent says over the phone "it's okay", does that prevent a future IRS auditor from disqualifying the assets (making it immediately taxable)?

 

Excellent questions. I think that the answer is "No" on both counts, and that is an example of what makes our tax system so crazy. But what is an individual supposed to do? I did the responsible thing and called the IRS -- twice -- and yet I'm afraid to make this move for the very reason that you described: the rep could be wrong and I could end up paying all sorts of taxes and penalties.

 

What a referendum this is on our current income tax system. If we can't trust the IRS to give us correct answers, who CAN we trust?

 

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We're to to the best we can, finding the correct compentent professionals to help us. We don't go to the dentist for a sore foot. Similarly, should we ask a pure investment advisor about qualified plan rules? We should ask them for investment advice.

 

Should we ask the IRS about the treasury rules and regulations that they we to deal with? Seems logical, but we already know their track record is not as high as we would like.

 

I'm sure the people appointed/elected to be in charge of the IRS have never had trouble with their taxes, maybe we can ask them. ;) I am kidding of course. Perhaps some day there will be less passages inside this twisty maze of rules that we have built around ourselves - not sure if that will actually make things better or worse overall though.

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