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Received a check from a residency 403b that I didn't know I had -

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  • Received a check from a residency 403b that I didn't know I had -

    It's only 200 bucks. Here's the text:


    THIS NOTICE CONFIMS A WITHDRAWAL FROM YOUR ACCOUNT.
    THE DISTRIBUTION IS BASED ON THE VALUE OF YOUR ACCOUNT AS OF 1/2/2015.

    TAXABLE AS ORDINARY INCOME 277
    FEDERAL TAX WITHHELD 55.51
    STATE TAX WITHHELD 5.55
    NET DSTRIBUTION ANOUNT 216

    THIS DISTRIBUTION IS FROM A 403B(7) RETIREMENT PLAN CUSTODIAL ACCOUNT.

    YOU MAY BE ABLE TO ROLLOVER YOUR TAXABLE AMOUNT TO AN IRA.

    I didn't know about this 403b, but my question is, how come they performed a 'withdrawal', and why couldn't I have had the option to rollover directly into a current 401k/403b instead of getting a distribution?

  • #2
    For ERISA plans if it is less than $5K they don’t have to keep you in the plan. Even though 403b plans aren’t ERISA they probably use similar rules. Sounds like you can do an indirect rollover to your IRA but for only $200 I would just consider it found between the couch cushions and use it as spending money.

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    • #3
      do you have a current 401k/403b? you could roll it into that if allowed, instead of an IRA. I wouldn't put it in an IRA, for backdoor purposes

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      • #4
        I recommend you do a 60-day indirect taxable rollover to a Roth IRA. You should make up the withheld amounts and rollover the full amount of the distribution.

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        • #5
          Originally posted by spiritrider View Post
          I recommend you do a 60-day indirect taxable rollover to a Roth IRA. You should make up the withheld amounts and rollover the full amount of the distribution.
          Agree, or just go out to a nice dinner and reminisce about how "awesome" residency was.

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          • #6
            Originally posted by legobikes View Post
            It's only 200 bucks. Here's the text:





            I didn't know about this 403b, but my question is, how come they performed a 'withdrawal', and why couldn't I have had the option to rollover directly into a current 401k/403b instead of getting a distribution?
            You did "know about this 403b". Remember the orientation meeting? At some point they gave you a piece of paper that "informed you" about it or referred you to some esoteric website that contained the SPD. This the definition of "Informed Consent" used in all medical practices. Click the box, sign the form. Done. You agreed. Happens every year with the new contract.

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            • #7
              Originally posted by spiritrider View Post
              I recommend you do a 60-day indirect taxable rollover to a Roth IRA. You should make up the withheld amounts and rollover the full amount of the distribution.
              Can I do this even if I just did a 6k backdoor Roth conversion?


              Honestly sounds like too much trouble compared to just using the 200 bucks, but wondering anyway.

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              • #8
                Originally posted by legobikes View Post
                Can I do this even if I just did a 6k backdoor Roth conversion?
                Rollovers have nothing to do with contribution limits.

                Honestly sounds like too much trouble compared to just using the 200 bucks, but wondering anyway.
                It's too much trouble to write an ~$277 check to a Roth IRA custodian and indicate it is a rollover? If you are willing to pay ordinary income taxes on the distribution.

                It is a relatively trivial effort to get decades of tax-free earnings. While it may not matter much in the overall scope of your retirement portfolio. Why not

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                • #9
                  Do I need to inform the former custodian? Do I need to know specific dates for the withdrawal/disbursement? Do I then need to indicate this somewhere in my tax filing for the year? Already my eyes are watering...

                  Edit: do I need to figure out why some people are saying put it in a 401k andothers are telling me to put it in the IRA?

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                  • #10
                    Originally posted by legobikes View Post
                    Do I need to inform the former custodian? Do I need to know specific dates for the withdrawal/disbursement? Do I then need to indicate this somewhere in my tax filing for the year? Already my eyes are watering...

                    Edit: do I need to figure out why some people are saying put it in a 401k andothers are telling me to put it in the IRA?
                    no one is saying to put it in an IRA, or at least keep it there. You want the IRA balance to be $0 by 12/31/2022. Roll over to your 401k OR put it in the IRA and then immediately roll it over to your Roth IRA that you keep at the same brokerage (fidelity/vanguard/etc)
                    Last edited by JBME; 01-20-2022, 07:41 AM.

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                    • #11
                      Originally posted by legobikes View Post
                      Do I need to inform the former custodian? No, they’ve already cut the cord by distributing the withdrawal check. Do I need to know specific dates for the withdrawal/disbursement? Yes if you want to roll it over into your 401k, IRA or Roth IRA. You have 60 days to do an indirect rollover. No if you’re just planning to spend the $216. Do I then need to indicate this somewhere in my tax filing for the year? It is taxable, but former custodian already withheld 20%. You are still responsible for the balance up to your marginal rate. They will also send you a 1099-R for $277. Already my eyes are watering...

                      Edit: do I need to figure out why some people are saying put it in a 401k and others are telling me to put it in the IRA?
                      You should do whatever you prefer. Keep it pre-tax in current 401k (although taxes have already been withheld), rollover to Roth IRA or just spend it, your choice.

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                      • #12
                        The distribution date that starts the 60-day clock, is the date you receive the distribution check. The date on the check or the date it was sent do not matter. Likewise, the rollover date is when the trustee/custodian receives the rollover check.

                        How the distribution/rollover is reported on your tax return depends on the choice you make. Tax software should handle all scenarios when inputting the Form 1099-R and answering all questions correctly.

                        It is unnecessary to rollover to a traditional IRA and then do a Roth conversion to get it to a Roth IRA. You can simply do a taxable rollover directly to a Roth IRA. If you do the former it adds the complexity Form 8606 reporting. The latter requires no Form 8606 reporting.
                        ​​​​​

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