Mandatory Withdrawal 403b Plan 

Are mandatory 403b withdrawals required from a 403b plan at age 70 1/2?

403b plan accumulations after December 31, 1986 are subject to the age 70 1/2 mandatory withdrawal 403b plan rules applicable to IRA s.

There is no age 70½ minimum 403b withdrawals calculation for the balance in a 403b plan as of December 31, 1986.

The balance on December 31, 1986 is exempt from the mandatory 403b withdrawals rule though many 403b plans require distribution of pre-1987 assets to begin when an employee reaches age 75 or some other stated age.

If a 403b plan IRA rollover occurs, the pre-1987 exemption is lost.

While IRA rollovers cause the loss of the pre-1987 exemption, transfers to other 403b  plans do not cause the loss of the pre-1987 exemption.

Note that the amount of any 403b withdrawals from the 403b plan in excess of the required minimum distribution will reduce the 12/31/86 balance.

Also, if an amount is rolled over to an IRA, that amount reduces the 12/31/86 balance and must be taken into account in determining the minimum distribution from the IRA under the IRA rules.

What about premature 403b withdrawals?

403b plans have the same premature 403b withdrawals features as other qualified retirement plans - in addition to taxation as ordinary income; a 10% penalty applies unless an exception is available.

The 10% is not withheld; the taxpayer must file a Form 5329 to pay it.