If you're thinking about a 403b rollover, then you need to be aware of some important rules, especially if a distribution is made directly to you.  Doing a rollover the wrong way can result in an unnecessary tax penalty, that's why it's so important to follow all the rules the IRS has established.  The first item we're going to discuss has to do with what is called the 60-day rule.

Sixty-Day Rollover Rule

Normally, a 403b rollover needs to be completed by the 60th day following the day you've received any distribution.  If you're planning to rollover the money into another account, then meeting the requirements of this 60-day rule shouldn't be any problem.  If you're planning to hold onto the money for some reason past the 60th day, then you might wind up paying a large tax penalty.

The IRS does allow for two exceptions to the 60-day rule.  The first has to do with unforeseen circumstances or hardships.

Hardship Exception for 403b Rollovers

The IRS can waive the 60-day rollover rule for 403b plans if you can provide evidence that you've experienced some kind of hardship.  The hardship can take a number of forms, but should be beyond the reasonable control of the individual making the rollover such as a hospitalization or some other kind of disaster.

If you're in need of a hardship exemption, then you need to apply to the IRS for a waiver of the 60 day rollover requirement.  You'll also be required to pay an application fee.

Exemptions are not automatically granted, and the IRS uses some of the following factors to determine whether an exception should be granted:

1. Errors made by financial institutions or banks
2. Delays due to postal errors, hospitalization, or disability
3. Whether or not you used the 403b distribution in any way, including cashing the check itself
4. The amount of time that has passed since the distribution

The second exception to the 60 day rollover rule has to do with money being frozen in an account.

Frozen Deposit Exception for 403b Rollovers

The 60-day rule for completing a 403b rollover can be extended for any amount of time if the distribution is frozen in a bank deposit or with a financial institution.  In addition, the 60 day period cannot end any earlier than ten days after the account is no longer frozen.

To qualify as a frozen deposit, the account must be with:

1. A financial institution that is bankrupt or insolvent, or
2. The state in which the bank is located has placed limits on withdrawals because one or more financial institutions of that state are bankrupt or insolvent.

If you are considering a Rollover be sure to speak with a professional to help you through the process.

If you are considering Retirement Planning, call for a free consultation today.