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April 20, 1989
TO: PENSION MEMBERS NO. 23-89
RE: IRS REVENUE RULING CONCERNING IRA ROLLOVER FROM A
SECTION 403(b) ARRANGEMENT
__________________________________________________________
Attached is a copy of IRS Revenue Ruling 89-50, which
addresses the rollover into an IRA of a total distribution from a
section 403(b)(1) annuity contract that includes amounts
contributed by the employer in excess of the exclusion allowance
under section 403(b)(2).
Section 403(b)(8) of the Code permits the tax-free rollover
of total distributions from section 403(b) arrangements to IRAs
or other section 403(b) arrangements. This section, however, is
subject to rules similar to those under section 402(a)(5)(B),
which states that the maximum amount that can be rolled over is
the amount distributed reduced by employee contributions.
Employee contributions for this purpose include employer
contributions includible in the gross income of the employee.
The ruling holds that employee contributions to a section
403(b) arrangement include those employer contributions that are
in excess of the exclusion allowance and therefore includible in
the employee's gross income. Therefore, such amounts were not
eligible for rollover under section 403(b)(8) of the Code, and
may be subject to the six-percent tax under section 4973. The
inclusion of such amounts, however, would not affect the rollover
treatment of the eligible portion of the transferred amounts.
We will keep you informed of further developments.
Kathy D. Ireland
Assistant General Counsel
Attachment