Can You Rollover Traditional IRA Into a 403B?

The traditional individual retirement arrangement, or IRA, is a tax-deductible retirement savings account designed to provide an incentive for those below a certain income level to set money aside for retirement. The IRA was first introduced in 1974 with the Employee Retirement Income Security Act. The 403b, or Tax Free Annuity plan, is a much older workplace plan designed to assist nonprofit and educational employees in deferring income on a tax-advantaged basis to save for their own retirements. You can roll over traditional IRA balances to 403b plans, but only under certain conditions.

Pre-Tax Versus Post-Tax Dollars

Because the 403(b) is a pre-tax retirement savings vehicle, you can only roll pre-tax dollars into the account. Generally, your traditional IRA account is made with pre-tax dollars, so there is no problem with rolling money over into a 403(b) plan. You cannot roll a Roth IRA into a 403b, however, because the Roth IRA is not pre-tax. You can, however, roll a Roth into a designated Roth account within your 403b, if your employer's plan allows. Check with your employer for specifics.

Direct Rollovers

Generally, you must execute a direct rollover to a 403b plan that accounts for the taxable and nontaxable parts of the rollover. If you roll over only part of your IRA, and part of your IRA is taxable, the IRS will consider the rollover to have come from the taxable part of your IRA.

Plan Restrictions

While the IRS allows direct tax-free rollovers from traditional IRAs to 403b plans, not all employer plans allow the rollover. This is because it can cause additional administrative burdens to account for these different balances and transactions. Contact your employer's human resources department and learn the particular policy prior to executing the rollover.

Restrictions

The IRS prohibits tax free rollovers of amounts that are subject to required minimum distributions (RMD) in the year in which they are due. You cannot use rollovers to avoid taxes on RMD amounts. Instead, you must take the RMD in full, or risk a penalty of 50 percent.

references & resources