How to Roll Over a 401(k) to a 403(b)

A 401(k) is an employer-sponsored retirement account for for-profit employees. A 403(b) is a similar account for public schools, religious organizations, and tax-exempt 501(c)(3) organizations. Both offer tax advantages. Moving funds from a 401(k) to a 403(b) is a rollover. This guide details the steps and considerations.

Understanding 401(k) and 403(b) Rollover Eligibility

Moving funds from a 401(k) to a 403(b) is generally allowed. Employment status is a primary factor; rollovers are typically for those no longer employed by the 401(k) company. If still employed, some plans restrict fund movement, while others permit “in-service” rollovers.

Confirm if the receiving 403(b) plan accepts 401(k) rollovers. Not all 403(b) plans are set up for these transfers, as determined by the administrator. Contact your current employer’s HR department or the 403(b) plan administrator before initiating any action.

Both 401(k) and 403(b) plans can be traditional (pre-tax) or Roth (after-tax). For a tax-free rollover, match account types: traditional 401(k) to traditional 403(b), and Roth 401(k) to Roth 403(b). Rolling a Roth 401(k) into a traditional 403(b) would result in a taxable event.

Essential Information and Documents for Rollover

Before starting the rollover, gather necessary information and documents. You will need personal identification details (full legal name, Social Security Number, current address). Also essential are accurate account numbers and contact information (phone numbers, mailing addresses) for both the originating 401(k) and receiving 403(b) administrators.

Decide between a direct or indirect rollover. A direct rollover transfers funds directly from your 401(k) to your 403(b) administrator, generally avoiding immediate tax withholding and penalties. An indirect rollover distributes funds to you; you then have 60 days to deposit them into the new 403(b). This method typically includes a mandatory 20% federal tax withholding, which you must cover from other sources to roll over the full amount.

Obtain specific forms from both administrators: a distribution request from your 401(k) and a rollover acceptance from your 403(b). Complete these precisely, designating the receiving institution and specifying the exact rollover amount. Prepare any supporting documentation, such as proof of employment termination.

Step-by-Step Rollover Procedure

Once information and forms are ready, initiate the transfer. Submission methods vary by administrator and may include mailing, online upload, or faxing. Adhering to the specified method ensures timely processing.

For a direct rollover, coordinate with both administrators. Instruct your 401(k) administrator to send funds directly to your 403(b) administrator. Funds move between institutions without passing through your personal bank account, preventing immediate tax liabilities or penalties.

After submission, anticipate a processing period of several days to a few weeks. Track the rollover progress by following up with both administrators if you do not receive confirmation. Many administrators provide online tools or customer service numbers for tracking.

The final step is confirming the successful transfer of funds into your 403(b). Review your new 403(b) statement or online account to ensure the full amount was received and properly allocated. Address any discrepancies promptly with the receiving administrator.

Understanding Rollover Tax Implications

Tax implications of a 401(k) to 403(b) rollover depend on the transfer type. A direct rollover, moving funds directly between administrators, is generally tax-free. This ensures funds maintain tax-deferred status without triggering immediate income tax obligations or penalties.

In contrast, an indirect rollover means you receive a distribution check from your 401(k). The distributing plan typically withholds 20% for federal income taxes. To avoid this distribution being taxable income and a potential 10% early withdrawal penalty (if under 59½), you must deposit the full amount into your 403(b) within 60 days. This requires using other personal funds to cover the 20% withholding to roll over the entire amount.

Missing the 60-day deadline for an indirect rollover makes the entire distribution taxable income. If under age 59½, a 10% early withdrawal penalty also applies. The goal of any rollover is to avoid these taxable events during the transfer.

For reporting, you will receive Form 1099-R from the distributing 401(k), indicating the distribution amount. The receiving 403(b) will issue Form 5498, confirming rollover fund receipt. These forms are important for accurate tax filing and demonstrate proper rollover, maintaining tax-advantaged status.