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403(b) Rollovers

Q. A TPA is telling me my client cannot roll her 403(b) from the school district where she had worked into her 403(b) in the school district where she now works, even though the new employer’s plan allows rollovers. The TPA says the old plan prohibits the client from rolling over to another 403(b), but that she may roll it over to an IRA or a 401(k). Can the former employer restrict the client from rolling over into the new employer’s 403(b)?

A. Yes, the acceptance of rollovers into a 403(b) plan is optional, and employers can choose not to make rollovers into the plan available. Most don't have such a restriction since rollovers into the plan do NOT force the plan to accept the rules of the "old" plan. What is the reason?  Rollovers require a distribution, and once the assets are distributed from the former plan, all of the former's plans rules disappear. Perhaps a discussion with the TPA and the employer would help result in a decision that would not be unnecessarily restrictive.

04/18/2015