undoing 403(b) contributions

[nickel]

Hey all,

Does anyone here know if it's possible to "undo" current year 403(b) contributions without a penalty? I know that this is possible for "excess contributions" to a Roth IRA, but...

I haven't been able to find any information as to whether or not this could be done for 403(b) contributions. Note that I'm talking here about allowable contributions, not excess contributions that happened due a change of jobs, or some such.

Don't worry, I'm not planning on doing anything stupid...

Thanks.

[Urchina]

Ask your plan administrator?

Also, if an "undo" is possible you'll have to pay taxes on the withdrawn contributions, since they went into the account pre-tax.

It's also possible that you'll be bumped into a higher marginal tax bracket (since you took the contributions as income instead of deferred income).

[nickel]

Yeah, I'm not worried about the tax consequences. My side business has done well this year, so I can put more into the SEP than anticipated. Thus, there's not real need for the 403(b) right now, and this account contains only this year's money, so it would streamline things if I could pull the money and put it into the SEP instead. That being said, I don't want to pay a penalty.

I'm guessing that this sort of thing is regulated by the IRS, and my general experience has been that people like those that hang out here are generally better informed than the plan administrator when it comes to things like IRS regulations relating to retirement accounts. Sad but true.

[FinanceDude]

Quote:

Originally Posted by nickel Yeah, I'm not worried about the tax consequences. My side business has done well this year, so I can put more into the SEP than anticipated. Thus, there's not real need for the 403(b) right now, and this account contains only this year's money, so it would streamline things if I could pull the money and put it into the SEP instead. That being said, I don't want to pay a penalty.

Why screw around with it now? Just quit funding the 403B starting January 1st, and do the SEP thing only.........

Quote:

I'm guessing that this sort of thing is regulated by the IRS, and my general experience has been that people like those that hang out here are generally better informed than the plan administrator when it comes to things like IRS regulations relating to retirement accounts. Sad but true.

Most plan admins don't know much of anything........

[nickel]

Main reason to screw around with it now is that it will be one less account to deal with when managing our overall allocation. If I can get rid of it without creating any tax-related problems, then I might as well do so. If not, then I'll live with it.

[nickel]

Just closing the loop on this... I just called HR and it sounds like Urchina was correct, they can correct contribution mistakes. However, since this wasn't technically a "mistake", they can't do anything. They will only make adjustments for contributions that are accidentally duplicated, or other sorts of over-contributions.

[FinanceDude]

Quote:

Originally Posted by nickel Just closing the loop on this... I just called HR and it sounds like Urchina was correct, they can correct contribution mistakes. However, since this wasn't technically a "mistake", they can't do anything. They will only make adjustments for contributions that are accidentally duplicated, or other sorts of over-contributions.

Can you do a non'hardhip withdrawal with your plan? That way, you could roll it to an IRA. I'd have to check the rules but you might be able to roll it to your SEP. Try www.fairmark.com

[youbet]

Close the 403b. Roll it over to a rollover IRA. Mangage that however you want until RE time. Unless you're saying you have too large a percentage of your assets in deferred accounts, I'm having difficulty seeing what the problem is.

[nickel]

I can't close it without penalty because I still work there. Aside from that, it's just convenience. Yes, I can just dial it in to one type of investment and let it ride as part of my overall allocation, but I always prefer having fewer accounts rather than more.

[youbet]

Quote:

Originally Posted by nickel I can't close it without penalty because I still work there. Aside from that, it's just convenience. Yes, I can just dial it in to one type of investment and let it ride as part of my overall allocation, but I always prefer having fewer accounts rather than more.

That's interesting. My DW works p/t for a school dist and had a 403b there. She was able to discontinue contributing and roll it over to a rollover IRA at Schwab with no penalties or other issues. She's still working p/t there. The 403b provider, ING, allowed it and that's all it took. The school dist was not part of the decision.

She did this because we made the decision that the percentage of retirement funds in our deferred accounts was where we wanted it to be.

There were a couple of threads on this subject a while back. You might want to do a search and find them.

[nickel]

youbet: Thanks. I'd love to be able to do that. I'll keep digging.

[youbet]

nickel.....

Don't try to "undo" this year's contributions. Can't be done.

Don't use HR as a resource, rather talk to the 403b provider you're using. Generally, they have conditions (usually number of year you've been contributing) which dictate any penalities involved if you leave them and rollover to an IRA. The only role HR will play is notifying payroll no longer send $XXX to your 403b provider every payday!

If you don't mind saying, which insurance co or brokerage house is your 403b with?

[nickel]

I'm in the fortunate situation of having the 403(b) money at Vanguard. However, my employer is ending the Vanguard relationship at the end of this year. Just one more reason to funnel money into my SEP (also at Vanguard) instead of the 403(b). Since I'm free to leave the account in place at Vanguard (I just can't add to it), this really is just a matter of convenience. If I can get the money out, it will go straight over to my Vanguard SEP and will be invested in much the same way.

Regarding "undoing" the contributions, you're right. Not much hope of that happening. I'll probably wait until sometime next year (after my employer's Vanguard relationship is a thing of the past) and then just ping Vanguard and figure out my options from there.