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QuestionAnswer
True/False, amounts transferred from a custodial account to an annuity take on the rules applicable to annuity accounts: False: Amounts transferred from custodial accounts to annuities remain subject to the custodial account distribution restrictions.
What is the difference between an exchange? Participants generally use an exchange to change their investments within the same plan, or may use a transfer because of a change in employer.
Participants generally use an _____a_____to change their investments within the same plan, or may use a __b_____because of a change in employer. Participants generally use an EXCHANGE to change their investments within the same plan, or may use a TRANSFER because of a change in employer.
True/False: A rollover is the same as a transfer. False: Although substantively similar to a rollover, the transfer or exchange is not a rollover and the the transfer rules apply to current and former employees and also apply to 403(b) plan beneficiaries.
A participant accomplishes a ___?___ by instructing the insurance company or custodian to transfer the funds to another custodian or insurance company. A participant accomplishes a TRANSFER by instructing the insurance company or custodian to transfer the funds to another custodian or insurance company.
Must plans allow for transfer in of funds? No.
May a participant transfer only part of the participants 403b account? A transfer may consist of all or part of a participant’s 403(b) account.
what was called a ___?___ before 9/24/07 is now called an "exchange". what was called a "90-24 transfer" before 9/24/07 is now called an "exchange".
what was called a "90-24 transfer" before 9/24/07 is now called an ___?___ what was called a "90-24 transfer" before 9/24/07 is now called an "exchange".
what was called a "90-24 transfer" before __date?__ is now called an "exchange". what was called a "90-24 transfer" before 9/24/07 is now called an "exchange".
If Bob has a 403b plan with company A and with company B and is terminated with A but active with B, from which company's plan may Bob transfer assets? Bob's beneficiary? Bob or his bene can xfer from A to B plan or from B to A provided he is an employee or former employee with the receiving plan's sponsor.
If Bob has a 403b plan with company A and with company B and is terminated with A but active with B. Must the A plan provide for transfers? Must the B plan provide for receipt of transfers? No/No
T/F: A participants accumulated benefit after the transfer at least equals the participant's accumulated benefit before the transfer. True.
If annuity 403b is moved to mutual fund 403b7, will 403b1 restrictions still apply? Yes. the receiving plan must impose distribution restrictions no less stringent than those imposed on the transferor plan.
Must a 403(b) plan allow for transfers out? In? No.
Bob transfers 3/4 of his balance in PlanA 403b plan to PlanB. PlanB has no tax basis initially. He had an original tax basis in PlanA of $4,000. What is his new tax basis in PlanB? $3000. The basis is transferred on a pro-rata basis.
What are the two types of tax free transfers for 403b assets? 1. Purchase of service credits in a state retirement system db pension plan and 2. Plan to plan transfer
What qualifying event must occur before a participant may transfer 403b assets to purchase DB service credits? No qualifying event is required.
List two types of DB service that may be purchased through a 404b transfer? Purchase of additional years and purchase of enhanced benefits for service already earned and credited. Any type of type of service permitted under the service is OK.
Must a participant transfer assets from the 403b plan to another 403b plan or to purchase DB service credit before the age of 59 1/2? Yes. 59 1/2 restriction does not apply because it is not considered a distribution
May a plan to plan transfer or exchange be done indirectly from one provider to another? An eligible rollover? Plan to plan transfers or exchanges must be done directly from one provider to another. Only eligible rollover distributions can be done directly or indirectly.
To which vendors may a 403b participant exchange assets into? Any recipient vendor that is 'included” under the employer’s plan
May 403b loans be included in a transfer? Yes if the essential terms of the loan are unchanged.
For 403b transfer of loans, may the length of the loan be changed? No -- it is considered an essential term of the loan. Essential terms cannot change.
For 403b transfer of loans, may the interest rate of the loan be changed? No -- it is considered an essential term of the loan. Essential terms cannot change.
For 403b transfer of loans, may the amount of the loan be changed? No -- it is considered an essential term of the loan. Essential terms cannot change.
For 403b transfer of loans, may the payment frequency of the loan be changed? It is probably acceptable to change the frequency of installment payments from, for example, quarterly to monthly.
Where 403b assets are transferred which were grandfathered under the pre-89 MRD rules, will these assets continue to be grandfathered after the transfer? Not if proper records are maintained after the transfer to track these records.
Bob has annuity 403b assets grandfathered for the pre-89 withdrawal restriction. If he transfers these assets to another annuity, may this grandfathering be retained? What if the assets are exchanged instead of transferred? Yes in either case.
Bob has annuity 403b assets grandfathered for the pre-89 EE withdrawal restriction. If he transfers these assets to a 403b7 account, may this grandfathering be retained? What if the assets are exchanged instead of transferred? No -- if they are transferred or exchanged into a custodial 403b7 account, the entire amount moved would be subjec tto the premature distribution restriction before age 59.5 because no such grandfathering condition is available to 403b7 accounts.
Vendor A is included in the employers plan but Vendor B is not. Bob has assets with B -- may he transfer from B to A in his 403b? Only if the employer authorizes receipt of the account and plan permits exchanges from outside vendors
Vendor A is included in the employers plan but Vendor B is not. Bob has assets with A and B --under what conditions may he exchange assets from A to B He may not transfer assets into vendors not in the employers plan at all.
Vendor A and B are both included in the employer's plan. Must exchange paperwork be completed to move assets from A to B or B to A? This is not required by the IRS but may be required to comply with the product vendor requirements.
May Bob transfer assets from his 401k plan to his 403b plan? From his 457 plan to his 403b plan? No.
May a section 403b annuity contract ever be exchanged into an annuity contract that is not a section 403b contract? No.
Why may assets be transferred or exchanged in a 403b plan before termination or age 59.5? Because these are not considered distributions.
True/False: MRDs may be exchanged? Transferred? Rolled over? False. No amount containing a RMD may be transferred, exchanged, or rolled over. However RMD amts from one 403b may be satisfied through distributions from another 403b if ER allows.
Can an MRD for one 403b account be satisfied through distributions from a different 403b? Yes -- but this must be permitted by the plans. It is the er's responsibility to ensure the MRD takes place so the ER may not allow for it.
transfers and exchanges of 403b1 accts issued prior to Jan09 derived from ER contributions are not required to have restrictions of ER contributions. Would such remain grandfathered folling an xfer or exchange to another 403b1? 403b7? Only annuity to annuity.
What is the latest date by which an exchange could be made into an account of an unapproved investment in order for the account to be grandfathered for rev 90-24? 9/24/2007.
What is the latest date by which a sponsor could have forwarded contributions to an unapproved investment provider in order for the account to be grandfathered for rev 90-24? 12/31/2004
What responsibility does an ER have for a grandfathered account under rev 90-24? None. The responsibility rests with the vendor and the participant.
Bob has an account with Vendor A since 1990. A is not an approved provider and has no information sharing with the ER. If the last contribution forwarded by the sponsor to A on Bob's behalf is 9/1/2007, might the account be grandfathered for rev 90-24? No -- contributions cannot have been forwarded to A by the sponsor beginning 1/1/05.
Bob has an account with Vendor A since 1990. A is not an approved provider and has no information sharing with the ER. If Bob's last exchange into A was 9/1/2007, might the account be grandfathered for rev 90-24? Yes as long as no exchanges occurred beginning 9/25/2007.
Vendor V is not an approved provider with Sponsor S as of 2//2009. If V executes an information sharing agreement with S, could exchanges be allowed into V now? Yes.
After __date?__ allowable providers are included in the written plan. After 12/31/08, allowable providers are included in the written plan.
True/False If an exchange is made into the account for a vendor with no payroll slot, it is an improper exchange. False - its not an improper exchange if the vendor executed an information sharing agreement with the sponsor.
How is an improperly exchanged 403b account corrected before 7/2009 through a re-exchange to a 403(b) acct held with a provider that is part of the ER plan provided the re-exchange takes place on or before 6/30/09 and plan permit exchanges as a feature in the plan document.
For nonpermissable exchanges made between __date?__ and ___date?__, Rev Proc. 2007-71 provides they can be remedied through a re-exchange on or before __date?__ nonpermissible exchanges made from September 25, 2007 through December 31, 2008 may be remedied under rev proc. 2007-71 through a reexchange on or before 6/1/09.
What are the consequences of failure to correct an improper exchange? Failure to correct can result in the individual's contract ceasing to be a 403(b) contract (i.e., taxable). This is an example of what is known as an "individual defect" which may disqualify the participant's contract but not the whole plan.
What is the purpose of a 403b information sharing agreement? Increase practical compliance with distr restrictions/universal availability rqmts where 403b assets have been transferred to to an insurance carrier or mutual fund that has no subsequent contact with the plan or ER
True/False: a 403b plan is subject to the same audit and reporting requirements of 401k plan? True.
What term describes when 403b account assets are moved from one vendor under the plan to another under the plan? This is not an exchange. The IRS takes the position this is merely a change of invesment options under the plan and requires no language in the plan to permit these transactions.
In order to permit a 403b participant to move assets from one approved vendor to another approved vendor in the plan, must the plan document include language to allow this? when both providers are a part of the plan, the IRS takes the position that this is merely a change of investment options with the plan. Thus, there would be no need for language in the written plan to permit these transactions.
What is the PPA Retiree Medical Premiums for Public Safety Officers rule? Beginning 07, public safety officers termd at NRA or due to disability can elect 3K to xfer directly to pay pretax for insurance
Can 403b participants rollover after tax assets to IRAs? Other 403bs? DB plans? After-Tax Rollovers. EGTRRA permitted an employee to roll over after-tax amounts to an IRA or a qualified defined contribution plan that separately accounts for the after-tax amount and the earnings on the after-tax rollover.
Can a 403b participant roll non-roth assets directly to a Roth IRA? Beginning 2008, an EE may elect a direct rollover to a Roth IRA, provided the current rules for converting a regular IRA to a Roth IRA are satisfied
Where may a spousal bene for 403b roll assets? Spousal bene can roll to spouse's own workplace plan or IRA.
Where may a non-spousal bene roll 403b asets? Non-spouse bene receiving distribution after 1/1/07 can rollover benefits from qualified plan to an inherited IRA (PPA 06).
What is the first date that a Roth provision may be made available to a governmental 457b plan? Roth 457(b) option added to governmental plans on 1/1/11.
As of which date may an eligible rollover of Roth account be rolled to another designated Roth account in a 403b different plan? Portability is extended to eligible rollover distributions of designated ROTH accts to Roth IRAs. As of 9/27/10, eligible rollover of Roth designated accts can be rolled to a designated Roth acct within each plan.
Can a Roth IRA be rolled into a Roth 403b account? Roth 403b and Roth 401k can be rolled to one another or to Roth IRA; However, a Roth IRA cannot be rolled into a Roth 403b/401k acct.
If Roth 401k is rolled to Roth IRA, what holding period applies? A new 5 yr holding pd will be applied unless the participant already established a Roth IRA acct. If so, the 5 yr holding pd applies to the first tax yr the already established Roth IRA was funded.
How is basis withdrawn from a Roth IRA to which a Roth qualified plan account was rolled? subsequent withdrawals will consist of contributions first (w/out taxes or penalty tax),
If Roth qualified account is rolled to a Roth IRA, what RMD rules subsequently apply ? no RMDs during acct holder's lifetime
What is the rule for distributions for a first time home purchase in a 403 b plan? 403b assets rolled to an IRA? In the IRA but not 403b, qualifying events for tax-free distributions include $10,000 for first time home purchase
What is the income limitation for 403b to Roth IRA rollover? Beginning 1/1/10, income limitation was eliminated
As of what date were IPRRs made available to 401ks? 403bs? Gvmt 457b? Beginning 9/27/10, IPRR available for 401k/403b; Beginning 1/1/11, IPRR available for governmental 457b assets.
Does the 5 yr holding period to avoid 10% penalty recapture applicable to qual plan IPRRs also apply if the plan is converted to Roth through direct rollover to IRA? IPRR or to Roth IRA - 5 year holding period applies to avoid 10% penalty recapture & penalty.,
What is the fed tax withholding on IRA distributions? None.
How often are indirect rollovers permitted to IRAs Indirect rollovers only permitted one time per IRA per 12 mths.
Can deductible IRAs be rolled to workplace plans? Only deductible IRA values can be rolled to workplace plans. After tax amts can be rolled only to another IRA.
Can a Distr paid to non spouse bene after death of participant be rolled from IRA.? No.
Can you roll assets from a 403b to a gvmt 457b plan? Yes but Rollovers to a 457(b) gvt plan must be separately tracked because the IRC §72(t) 10% penalty tax will continue to apply to the amt rolled from a 401(a), 401(k), 403(b) or IRA (for those who are pre-59 ½ without another exception).
What distribution restrictions apply to IRA assets rolled to a 403b? If segregated, the assets do not assume the withdrawal restrictions of the 403b
Are loans available in IRAs? No.
Can RMDs in an IRA be delayed until after the participant stops working? No.
If EE terminates after age 55, is he subject to the 10% early withdrawal penalty in his 403b plan? What if he rolls it to an IRA? the waiver of the 10% penalty as early as age 55 if severance from employment occurs in the same year or later is available for the 403b but not in an IRA until age 59½ (unless another exception to the penalty applies).
Are distributions for college expenses subject to the 10% penalty in a 403b? In an IRA? In an IRA, those withdrawals under certain conditions are not subject to the 10% penalty tax. In a 403(b) plan, there is no exception to the penalty tax.
Are distributions for health insurance premiums during unemployment subject to a 10% penalty in a 403b plan? In an IRA? the waiver of the IRS 10% penalty tax to pay health insurance premiums during periods of unemployment is available in the IRA but not 403b.
Are 457b distributions subject to the 10% penalty? No.
If 457b assets are rolled to a qualified retirement plan, with the 457b assets rolled over be subject to the 10% early distr penalty? Yes.
If 403b assets are rolled to the 457b gvt plan, are the 403b assets rolled over subject to the 10% distribution penalty? Yes.
EE Contributions to 403b annuity accounts are grandfathered from the distribution restrictions currently applicable if they were made by what date? Before 1989.
Contributions to 403b7 custodial accounts are grandfathered from the distribution restrictions currently applicable if they were made by what date? Never -- EE contributions to custodial accounts have always been restricted.
Until __date?__ there were no distribution restrictions on withdrawals of employer contributions to 403b annuities. until January 1, 2009, there were no distribution restrictions on withdrawals of employer (non-elective) contributions to 403(b) annuities
Until __date?__ there were no distribution restrictions on withdrawals of employer contributions to 403b7 custodial accounts. employer contributions held in 403(b)(7) custodial accounts were always subject to distribution restrictions.
True/False: Under the Code, distribution restrictions apply to The entire account value in every 403(b)(7) custodial mutual fund account. TRUE
Under the Code, distribution restrictions apply to the __?__ account values in 403(b)(1) annuities derived from salary reduction contributions. Under the Code, distribution restrictions apply to the post-1988 account values in 403(b)(1) annuities derived from salary reduction contributions.
Under the code, distribution restrictions apply to all contributions to 404b1 annuity contracts issued on or after __?_ All contributions to 403(b)(1) annuity contracts for all contracts issued on and after January 1, 2009
Under the Code, distribution restrictions do not apply to any account values derived from employer (non-salary reduction) contributions to 403(b)(1) annuity contracts issued before __?__ January 1, 2009
Under the Code, distribution restrictions do not apply to __?__ account values derived from salary reduction contributions to a 403(b)(1) annuity. pre-1989
When Are Distributions Permitted From Salary Reduction Contributions to 403(b) Accounts? age 59 ½, termination, QDRO, hardship, corrective distributions
When are Distributions Permitted from Employer Contributions to 403(b) Accounts? based upon a stated age, a stated event (such as separation from service) or after a fixed number of years.
For distributions of ER 403b contributions, what is the minimum number of years after which distributions may be allowed? (2) year period for this purpose.
Exceptions to the 10% premature distribution penalty tax for 403(b) plans include: Death, disability, substantially equal pmts, termination after age55, QDROs, corrective distributions, refunds of excess, refunds of auto enrollment contributions.
What are the 10% penalty exceptions in IRAs not available to 403bs? Pay health insurance premiums during unemployement, purchase a first time home, pay for higher ed expenses.
Distributions from a governmental defined benefit plan made after August 17, 2006 to qualified public safety employees who separate from service after attaining what age will not be subject to the 10% early distribution penalty tax. Age 50. Qualified Ees here are police, fire fighters, emergency medical services.
Are inservice distributions allowed from pension plans? Effective for distributions in plan years beginning after January 1, 2007, the PPA provides that a pension plan may make in-service distributions to employees who have attained age 62 or NRA and are still actively employed.
Can a 457(b) plan be amended to provide for hardship distributions based on the hardship of the participant's beneficiary such as child/partner? Yes.
What is the 10% distribution penalty for active duty military reservist? A distribution between 9/11/01 and 12/31/07 from an IRA or 401(K) or 403(b) plan that is attributable to ER contributions to an EE who is called to active military service for at least 180 days not be subject to the 10% penalty tax.
When may distributions be made from gvt 457 plan? Age 70 1/2, termination, unexpected emergency hardship, plan termination, one time small balance distribution if no contributions for 2 yrs.
Can a nonspousal bene roll gvt 457b/403b assets to an inherited IRA indirectly? No - direct rollovers only.
Created by: alkstudy