AboutDavid M Iannopollo Expertise I am a professional financial advisor who can assist you with answers on mutual funds, annuities, IRA's, rollovers, qualified and non-qualified retirement plans, retirement planning, educational planning, life, disability and LTC insurances.
Experience I have over 20 years experience in the business and financial world.
Question My employer provided access to a 403B account which I participated in and had borrowed funds which I was paying back on a monthly basis. With the new restrictions effective in January our employer switched to a 401K with another provider. I was informed I would have to pay back the entire loan before Dec. 31st of 2009 because it will be necessary to roll it over to an IRA and I cannot borrow from an IRA..am I getting accurate advice?
Answer Hi Geri,
Because your 403b plan has been terminated it will be treated as if you had left your job in that any outstanding loan balance will be counted as a distribution if not paid back within (usually) 60 to 90 days. That means that it is taxable as ordinary income plus a 10 percent early withdrawal penalty if you are under age 59 1/2. They are correct in that you cannot borrow from an IRA if it is rolled over.
Since all 403b and 401k plans can have different rules according to how the plan was written, you can check with the administrator of your new 401k plan to see if it allows loans to be rolled over into the new plan. That would be the only way of avoiding the distribution.
