If you have a 403b or 401a from a previous job, you might be thinking about what to do with it next. Maybe you’re changing employers or trying to simplify multiple retirement accounts. Either way, a rollover can help keep your savings tax-deferred and on track toward long-term goals.

This guide walks through the eligibility rules, timing, and tax implications, so you can make a confident move without running into tax surprises.

📌 Also read: What Are Pretax Contributions to an IRA/401k?

Table of contents

Check Eligibility and Know the Rollover Rules

Before you initiate a rollover from a 403b or 401a plan, make sure your distribution qualifies. Not all withdrawals are eligible for rollover treatment, and missing IRS deadlines could result in unexpected taxes or penalties.

Confirm Which Distributions Qualify

Most one-time, lump-sum payments from a retirement plan are considered eligible rollover distributions. However, some types of withdrawals cannot be rolled over.

Excluded distributions typically include:

❌ Required minimum distributions (RMDs)
❌ Hardship withdrawals
❌ Corrective distributions
❌ Periodic annuity-style payments (also called substantially equal payments)

If your distribution falls into any of these categories, it generally must remain taxable and cannot be moved into another retirement account.

📝 Note: Before initiating a rollover, check with your plan administrator or review your distribution paperwork to confirm if your payment is eligible under IRS rules.

Understand the 60-Day Rollover Deadline

Once you receive an eligible distribution, the IRS typically gives you 60 days to deposit those funds into another qualified plan or IRA. This is known as an indirect rollover because the funds are paid to you first.

If you miss the 60-day window, the amount could become taxable. In some cases, the IRS may allow an exception. This may happen through:

  • An automatic waiver
  • A self-certification process
  • A private letter ruling

Direct vs Indirect Rollovers

There are two ways to roll over your money, and the option you choose affects your tax situation.

Direct rollover (recommended):

  • Funds are sent directly from your old plan to the new plan or IRA.
  • You avoid the mandatory 20% federal withholding.
  • The check is made payable to the receiving institution (or transferred electronically).

Indirect rollover:

  • You receive the money first.
  • The plan must withhold 20% of the amount for federal taxes.
  • You must deposit the full original amount, including the withheld 20%, into the new account within 60 days to avoid taxes and penalties.

📝 Note: Many taxpayers unintentionally lose the 20% when they do not have extra funds to make up the difference. A direct rollover avoids this problem.

📌 Also read: Key Differences Between Direct And Indirect Rollovers

Know the Rules for After-Tax Contributions

If your account includes both pretax and after-tax money, the IRS allows you to split the destination in a single transaction.

Under IRS Notice 2014-54, you may:

✅ Send pretax amounts and earnings to a traditional 401k or traditional IRA
✅ Send after-tax contributions to a Roth IRA

This preserves the tax-deferred status of your pretax savings and lets your after-tax money enter a Roth account, where future growth may be tax-free.

The rule applies to both 403b and 401a accounts. Make sure your plan administrator can support this type of split transfer.

Rules to Watch for in 401a Plans

Some 401a plans may limit your rollover options. Always check the plan’s distribution policy and confirm that the receiving account accepts incoming rollovers of this type.

What to verify:

✅ Your current plan allows outbound rollovers
✅ The destination account (401k or IRA) accepts rollovers from a 401a

If either plan restricts the transfer, the rollover may be delayed or denied. 

Be Aware of Small-Balance “Cash-Out” Rules

If your 401a balance is small, the plan may automatically distribute it without your consent. This usually applies when the balance is under $7,000.

  • If between $1,000 and $7,000, the plan may roll it into an IRA automatically.
  • If under $1,000, the plan may issue a check directly to you.

📝 Note: It’s important to plan ahead to avoid an automatic rollover to an account you didn’t choose.

Handle Plan Loan Offsets Properly

If you leave your job or the plan ends, any unpaid loan from the plan may count as a loan offset. This amount reduces your account balance and is treated as a distribution.

There are two types:

  1. Ordinary loan offset – Follows the regular 60-day rollover rule.
  2. Qualified plan loan offset (QPLO) – Offers more time, typically until your tax return due date (including extensions) for that year.

📝 Note: It’s important to know which loan offset applies. The timing affects your ability to preserve tax deferral.

Choose the Right Destination for Your Rollover

Once you confirm your funds are eligible for rollover, the next step is choosing where to move them. That choice affects how your money is protected, invested, and taxed over time.

Both 401k plans and IRAs offer tax advantages. But the right destination depends on how much flexibility, control, and protection you want.

Compare Protection, Investment Options, and RMD Rules

Your new account’s legal protections and investment flexibility can vary.

Creditor protection:

  • Employer plans like a 401k are covered by ERISA, which provides strong protection against most creditors through what’s called “anti-alienation” rules.
  • IRAs are not under ERISA. They are protected under the Bankruptcy Code, which exempts rollover funds from employer plans but caps protection on IRA-only balances. The limit is updated every three years under IRC Section 522(n).
  • Your state laws may offer added protection beyond federal rules. Check with a qualified professional for details.

Investment choices and fees:

  • A 401k usually gives access to a limited menu of investments. However, it may include institutional-share mutual funds with lower fees and comes with fiduciary oversight.
  • An IRA typically opens the door to a wider variety of investments, including mutual funds, ETFs, CDs, and more. But you’ll want to avoid IRS-prohibited assets and transactions.
  • Always compare fees using official disclosures:
    • For 401k plans: add administrative fees + fund-level expenses
    • For IRAs: review custodial fees + investment fees

Required minimum distributions (RMDs):

  • Employer plans may let you delay RMDs past age 73 if you’re still working and not a 5% owner.
  • Traditional IRAs do not have this delay. You must begin RMDs at age 73 no matter your job status.
  • Roth IRAs have no lifetime RMDs. Starting in 2024, Roth 401k and 403b accounts also no longer require RMDs during the account holder’s lifetime.

📝 Note: If you’re choosing based on long-term control or tax efficiency, these RMD rules may affect your decision more than you think.

When a 401k May Be the Better Fit

A qualified employer plan could offer better protections and features in certain cases. Consider sticking with or rolling into a 401k when:

✅ You want to keep ERISA protections, which are typically stronger than non-bankruptcy IRA protections.
✅ You plan to keep working past age 73 and want to delay RMDs. This is allowed only if the plan permits and you’re not a 5% owner.
✅ You expect to need access to loans. Qualified plans may allow participant loans, but IRAs cannot offer this feature.
✅ You prefer the structure and oversight of a curated plan with fiduciary responsibility. These plans may also offer institutional fund pricing that lowers investment costs.

📝 Note: Always check the receiving plan’s policies on roll-ins, fees, and loan features before deciding.

When an IRA May Be the Better Fit

IRAs offer more control and investment flexibility. They may be the right move if:

✅ You want a broader range of investments, including options not offered by your old or new 401k.
✅ You value portability — IRAs stay with you regardless of job changes.
✅ You want to convert pretax money to a Roth IRA for potential tax-free withdrawals later. This triggers a tax event but can reduce your long-term tax burden if done strategically.

📝 Note: Roth IRA conversions may make sense if you expect to be in a higher tax bracket in retirement. But the move should be planned carefully to avoid pushing yourself into a higher current tax bracket.

RMD Timing and Cost Considerations

Moving funds into an IRA may change how and when distributions begin—and how much you pay in fees.

What you lose with an IRA rollover:

❌ No more “still working” delay for RMDs. You must start traditional IRA RMDs at age 73 even if you’re still working.

What you gain:

✅ Roth IRAs do not require RMDs during your lifetime.
✅ Roth 401k and 403b accounts also dropped RMDs starting in 2024, so rolling Roth dollars to a Roth IRA may no longer be necessary for that reason alone.

Compare all-in fees before you roll over:

  • Plan = administrative + fund costs
  • IRA = custodial + fund costs

Note that even a small difference in ongoing fees, say 0.3%, can lead to thousands of dollars less over a 20-year period due to compounding.

How to Complete a Rollover

Getting the rollover done correctly can help you avoid taxes, penalties, and paperwork issues. Even one mistake, like missing a deadline or filling out the check incorrectly, can lead to unintended tax consequences.

Here’s a step-by-step checklist to keep your rollover tax-free and fully documented.

Step 1 — Contact Both Providers in Advance

Before you request any transfers, call both your distributing plan and the receiving account custodian.

Ask the receiving custodian:

  • “Do you accept rollovers from a 403b or 401a?”
  • “What payee format should appear on the check?”

The check is usually made out as:

[Receiving Trustee] FBO [Your Name] [Traditional IRA / Roth IRA]

Then, ask the distributing plan for:

📝 Note: The 402f notice is a standard IRS requirement. It helps you understand the tax impact of your choices and confirms the distribution is eligible to roll over.

Step 2 — Request a Full Breakdown of Your Account

Before the rollover begins, ask the distributing plan for:

✅ A detailed breakdown of your account

  • How much is pretax
  • How much is after-tax
  • Whether there is any designated Roth money

✅ Confirmation of your RMD status

  • RMDs are not eligible to roll over

✅ Details about outstanding loans, if any:

  • Some plans treat loan balances as offsets when you leave
  • Regular loan offsets must be rolled over within 60 days
  • Qualified plan loan offsets (QPLOs) tied to job loss or plan termination may be rolled over by your tax return due date, including extensions

Step 3 — Select the Right Transfer Method

The safest option is a direct rollover, where funds move straight from your old plan to the new account. This method reduces paperwork, avoids tax withholding, and keeps the transaction simple. Most providers prefer it, and it helps ensure your rollover stays tax-free without additional steps.

An indirect rollover gives you a check made out in your name. If you go this route, 20% of the total is withheld for federal taxes. To avoid triggering income taxes or penalties, you must redeposit the full amount (including the withheld portion) into a qualified account within 60 days. Missing this deadline may result in a taxable distribution unless you qualify for special IRS relief due to hardship or error.

📝 Reminder: Many taxpayers are caught off guard by the 20% withholding. If you don’t have cash on hand to replace it, part of the distribution could be taxed and penalized.

Step 4 — Handle After-Tax Contributions Correctly

If your plan includes after-tax dollars, give clear instructions on how to split the money between accounts.

Per IRS Notice 2014-54, you may:

  • Send pretax contributions and earnings to a traditional IRA or traditional 401k
  • Send after-tax employee contributions to a Roth IRA

Make sure these instructions are written clearly on your plan’s distribution form. This helps avoid pro-rata taxation, which can happen if the entire distribution is treated as a mixed pool.

📝 Note: Not all plans support split rollovers. Ask the plan administrator whether this option is available.

Step 5 — Submit and Save All Documentation

Once the funds are in motion, keep a full paper trail. If you receive a check, do not endorse it to yourself. Mail or deliver it directly to the receiving custodian as instructed.

Keep copies of the following for your records:

  • Distribution forms from the sending plan
  • The 402f Special Tax Notice
  • The check stub or wire confirmation
  • Receiving account confirmation
  • Year-end IRS forms:
    • 1099-R from the distributing plan
    • 5498 from the IRA custodian (if applicable)

Report the Rollover Properly on Your Tax Return

You’ll receive Form 1099-R for the distribution. Here’s how to handle the reporting:

For direct rollovers:

  • Code G usually appears in Box 7 (non-taxable direct rollover)
  • Box 2a (taxable amount) generally shows $0
  • If rolling from a Roth 401k/403b to a Roth IRA, Box 7 may show Code H

For indirect rollovers or Roth conversions:

  • The taxable portion must be reported
  • If after-tax funds are converted to a Roth IRA, Form 8606 may be required to track basis or conversion amounts

On your Form 1040:

  • Line 5a = total distribution
  • Line 5b = taxable portion
    If non-taxable, write “Rollover” next to line 5b and enter 0 for the taxable amount.

📝 Note: You generally only need Form 8606 if:

  • You convert a traditional IRA to a Roth IRA
  • You take IRA distributions that include after-tax basis

Most direct rollovers from an employer plan to a Roth IRA do not trigger Form 8606 on their own.

Final Thoughts

Rolling over a 403b or 401a takes planning, but the benefits are worth it. Start by checking that your distribution qualifies under IRS rules. Then, choose a destination that aligns with your goals, whether that means more investment flexibility, stronger protections, or better control over distributions.

A direct rollover is usually the simplest path. Once both custodians are aligned, submit the paperwork carefully and keep your records organized. With the right steps, your savings can stay tax-deferred and continue working toward retirement without disruption.


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