Ask the Experts!

 

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: My client is a teacher, age 57, who has retired from a school district.  She does some substitute teaching with the same district.  Will she be able to take distributions from her 403(b) without violating the in-service distribution rule?

Answer: Probably not, but it’s up to the plan administrator to decide.

Distributions from a 403(b) plan will be partly or completely restricted prior to the recipient’s age 59 ½ unless the participant dies, is disabled or has a severance from employment.  The question under the facts above is whether someone who has “retired” but continues to work part-time has severed from employment.  We are unaware of any IRS rulings on this specific question.

In the absence of clear direction, it will be up to the plan administrator to decide whether the severance condition has been met or not.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.