Portability permits the rollover of eligible distributions from eligible retirement plans to any other eligible retirement plan by participants and spousal beneficiaries of those participants.
The following generally explains the rules and requirements for the virtually interchangeable rollovers of eligible rollover distributions from most types of plans to others.
It is important to note that eligible rollover distributions may be rolled to or from the following types of plans:
- 401(a) DC and DB plans. However, eligible rollover distributions will apply to amounts payable as lump sum distributions or installment payments over a period of less than 10 years
- 401(k) plans
- 403(b) plans
- 457(b) plans sponsored by a governmental employer (457(b) plan assets of nongovernmental employers are not eligible for rollover treatment)
- Traditional deductible IRAs (note that the nondeductible portion of an IRA may not be rolled to workplace plans)
- SEPs
- SIMPLEs, but only if the distribution is made after the two-year holding period under the plan
Since 401(a), 401(k), 403(b) and 457(b) plans are governed by plan documents, it is always important to know whether the written plan language permits rollovers into the plan. It is a matter of law that direct rollovers out of those plans must be provided, however, the acceptance of rollovers into the plan is not mandatory. Generally, most plans do accept rollovers. If the participant’s workplace plan does not accept rollovers, the eligible rollover distribution could be directed to an IRA or to a SEP if the account holder has one.
Editor’s Note: This is an occasional feature in the NTSA Advisor. It is drawn from The Source, a book that covers technical, compliance, administrative and marketing aspects of the 403(b) and 457(b) markets. More information about The Source is available here.
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