August 20, 2019 at 4:27 am #firstname.lastname@example.orgParticipant
My 40yo daughter has left her employer and will start elsewhere soon. What might be her options with respect to what she has socked away in retirement funds so far, especially if she wishes to manage those funds outside bounds of an employer’s plan and restricted investment options? If she doesn’t have to move funds now and doesn’t do so. can she always do so at a later time? (She couldn’t have taken money out to manage on her own outside employer’s plan while still in employer’s employ, right?)August 20, 2019 at 3:24 pm #4030Alan S.Participant
She should determine the quality of her new employer plan before deciding what to do with the old 403b. If she wants the most autonomy for choosing investments, she would do a direct rollover to an IRA at the custodian of her choosing. But if her new plan offers good, low cost investment choices, she might instead roll the 403b into the new plan by direct rollover. She can still make investment changes with reasonably frequency in the new plan in most cases, but perhaps not as often and not as many choices as in an IRA. IF she lives in CA or one of the other states that do not provide good creditor protection for IRAs, she might favor the new plan or keep the 403b in place to get ERISA protection. Some 403b plans are not ERISA plans however, so if she keeps it in place she should determine if the 403b is an ERISA plan or not.
If she retains the 403b, she can also move it at a later date, but if the balance is under 5000, the plan can require her to move it sooner.
Finally, you are correct that she could not have taken an in service distribution from the 403b while employed and under 59.5 unless the plan offered hardship distributions or loans.August 22, 2019 at 8:17 pm #email@example.comParticipant
You mention rolling the 403(b) into an IRA with a custodian of her choosing. Can she incorporate a small business, e.g., one making cupcakes at home, and have a solo 401(k) to roll the 403(b) plans into? Does the IRS or DOL care if it is only a “nominal” business that exists to support a retiremnent plan, as opposed to a business with a real economic purpose and a retirement plan incidental to it? Might the IRS or DOL disqualify a plan though it was otherwise proper in all ways but was not a very active business, turning out only dozens of cupcakes a week rather than thousands of them? (I’m thinking of “artisanal” cupcakes, gluten-free ones made with non-GMO, organic ingredients, and eggs from free-range chickens.)August 22, 2019 at 11:41 pm #4042Alan S.Participant
She could roll the 403b directly into a solo K as long as the solo K agreement includes accepting rollovers from other plans. The IRS does not care how small the small business is as long as there is a profit motive, but if she should abandon this business, the solo K must be dissolved within a year, a 5500 EZ filed, and rolled over to an eligible plan, probably a traditional IRA.
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