The IRS has clearly indicated that no qualifying event is required for transfers or exchanges.
Thus, pre-59½ withdrawal restrictions do NOT apply to the values that are being transferred or exchanged under the final regulations. There have been reports of vendors refusing to honor requests for transfers or exchanges citing the restrictions on pre-59½ distributions. However, distribution restrictions have no bearing on the ability to do transfers or exchanges.
Vendor and Employer Requirements for Transfers
A plan-to-plan transfer is only permitted if the transferring 403(b) plan document and the receiving 403(b) plan document permit such transfers. The vendors must comply with each employer’s plan to determine whether:
- the recipient plan accepts transfers into the plan and
- whether the transfer is being directed to a vendor that is included under the recipient plan.
To comply with this requirement, vendors may require employers (or their designated third party plan administrator) to sign the transfer forms.
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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