What Are the Rules for a 403b Required Minimum Distribution?
Understand the specific withdrawal requirements for your 403(b). This guide clarifies the RMD process, timing nuances, and plan-specific rules to ensure compliance.
A 403(b) plan is a retirement savings vehicle available to employees of certain public education organizations, non-profit organizations, and specific ministries. These tax-sheltered annuity plans allow for tax-deferred growth, meaning taxes are not paid on the contributions or their earnings until the money is withdrawn. The Internal Revenue Service (IRS) mandates that individuals begin taking withdrawals, known as Required Minimum Distributions (RMDs), from these accounts upon reaching a certain age. This ensures that the deferred taxes on the retirement funds are eventually paid.
Determining Your Required Beginning Date
The timing of your first RMD is determined by your birth year, a rule established by the SECURE 2.0 Act. For individuals born in 1959 or earlier, the age to begin RMDs is 73. For those born in 1960 or later, the age will increase to 75, a change that takes effect starting in 2033. Your “Required Beginning Date” (RBD) is the specific deadline for taking your very first RMD, which is April 1 of the year following the year you reach the mandated age. For example, an individual turning 73 in 2025 has until April 1, 2026, to take their first distribution.
An exception exists for those still employed. If you are still working for the employer that sponsors your 403(b) plan past your RMD age, you may be able to delay distributions from that specific plan until you retire. This “still-working exception” does not apply to 403(b) plans from previous employers or other retirement accounts like traditional IRAs, for which you must still begin RMDs.
Delaying your first RMD until the April 1 deadline is permissible, but it results in two distributions being required in that single calendar year. The first RMD must be taken by April 1, and the second RMD for the current year must be taken by December 31. This can lead to a higher taxable income for that year.
Calculating the RMD Amount
The calculation for your RMD uses an IRS formula: the account’s fair market value as of December 31 of the preceding year divided by a life expectancy factor. For instance, your 2025 RMD would be calculated using your account balance on December 31, 2024. This factor is found in the IRS’s life expectancy tables.
Most account holders use the Uniform Lifetime Table to find their distribution period. This table is for unmarried account owners, married owners whose spouse is not more than 10 years younger, and those whose spouse is not the sole beneficiary. For example, a 74-year-old would find the corresponding distribution period in the table to calculate their RMD.
If you own multiple 403(b) accounts, you must calculate the RMD for each one separately. However, you are permitted to withdraw the total combined RMD amount from just one of those 403(b) accounts or any combination of them. This allows for strategic withdrawals, such as from accounts with less favorable investment performance.
This aggregation rule has specific limitations. While a similar rule applies to traditional IRAs, you cannot satisfy your 403(b) RMD requirement with a withdrawal from an IRA, or vice versa. The RMDs for different types of retirement plans, such as 401(k)s and 403(b)s, must be calculated and taken separately from accounts of the same type.
Consequences of Missing an RMD
Failing to take a timely or sufficient RMD results in a penalty. The IRS imposes an excise tax of 25% of the RMD shortfall, a change from the SECURE 2.0 Act.
The penalty can be lowered to 10% if you withdraw the required amount and file a corrected tax return within a two-year correction window.
To address the penalty, you must file IRS Form 5329, “Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts,” with your federal tax return. You can also request a waiver of the penalty if you can demonstrate that the shortfall was due to a reasonable error and that you are taking reasonable steps to remedy the situation.
Special Considerations for 403(b) Plans
Certain 403(b) plans have a provision for funds accumulated before 1987. These pre-1987 balances are subject to a rule that can delay RMDs on those specific funds until you turn 75 or separate from service, whichever is later. This delay is only permitted if the plan separately accounts for these funds.
The rules for beneficiaries who inherit a 403(b) depend on their relationship to the original account owner. A surviving spouse has the most flexibility, with the option to treat the inherited 403(b) as their own and delay distributions until their own RMD age. Most non-spouse beneficiaries are subject to the 10-year rule from the SECURE Act, which requires the entire account to be withdrawn by the end of the tenth year after the owner’s death. Exceptions to this rule exist for eligible designated beneficiaries, such as minor children or disabled individuals.
Individuals age 70½ or older can make a Qualified Charitable Distribution (QCD), a direct transfer of funds to a qualified charity. For 2025, an individual can direct up to $108,000 this way. A QCD can satisfy all or part of that year’s RMD, and the amount transferred is excluded from the individual’s taxable income.