If you're a schoolteacher or you work for a tax-exempt organization, your retirement savings options may include a 403(b) tax-sheltered annuity. A TSA lets you build your nest egg through elective deferrals and employer contributions. If you change jobs, you can roll the money over into another retirement account. The IRS also allows rollovers from other types of retirement plans, including IRAs, but there's a limit on how long you have to transfer the money.
Rollover Time Frame
Generally, you have 60 days to roll your IRA or TSA funds over into another qualified retirement account. The 60-day time frame only applies if you're rolling the money over yourself and the window begins the day after you actually receive a distribution from your plan. If you asked your plan administrator or IRA custodian to transfer the money directly to another retirement account for you, then you wouldn't be subject to the 60-day time limit.
Unless you ask for a direct rollover of your IRA or TSA benefits, you'll have to withhold federal taxes on the money. As of 2013, the withholding amounts were 10 percent for IRA rollovers and 20 percent for TSA distributions. You'll have to make up the difference when you roll over the rest of the money, otherwise it's treated as a taxable distribution. If you don't complete an IRA or TSA rollover within the 60-day time frame, then you'll have to pay ordinary income tax on the whole amount. You'll also get hit with a 10-percent early withdrawal penalty if you're under 59 1/2.
In some situations, the IRS will waive the 60-day requirement if you don't roll the money over in time. Automatic waivers are granted only if the following guidelines are met. The financial institution you're rolling the money over to had to have received the funds before the 60-day window expired. You must have followed all the steps for rolling the money over and the financial institution must have made an error that prevented the money from being deposited. The money must be put into the new account within one year from the beginning of the 60-day window. If these situations don't apply, you can still ask the IRS for a waiver, but it's not guaranteed that they'll grant your request.
There are some restrictions that apply to IRA and TSA rollovers. You can only roll money over from one IRA to another once every 12 months and rollovers aren't allowed for required minimum distributions or distributions of excess contributions and earnings. Money in a traditional IRA, which allows for tax-deductible contributions, can be rolled into any type of retirement plan except a designated Roth account. If you have a Roth IRA, which allows for tax-free withdrawals, you can only roll the money over into another Roth IRA.
If you're rolling over a TSA, you can't roll over any required minimum distributions, loans that were treated as distributions, hardship distributions, distributions of excess contributions or any distribution that's part of a series of substantially equal payments. Money from a tax-sheltered annuity can be rolled over into any type of retirement plan, excluding a SIMPLE IRA.
- Internal Revenue Service: Publication 4482, 403(b) Tax-Sheltered Annuity for Participants
- Internal Revenue Service: Retirement Plans FAQs relating to Waivers of the 60-Day Rollover Requirement
- Internal Revenue Service: Publication 590, Individual Retirement Arrangments
- Internal Revenue Service: Retirement Topics - Rollovers of Retirement Plan Distributions
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