I am 66 years old and still employed in New York. My employer just switched 403B plans from Voya to Pentegra. Because of this, I can no longer take a loan on my Voya account, and there's very little in my Pentegra account. I make a decent living, but recent unavoidable bills have made my expenses higher than my income. I can't put it on a credit card (which would be at high interest anyway) because the local property and school tax collectors, home repair contractors, etc, all want cash or checks. I expect some of these bills to be one time expenses. Some will be reimbursed within the next 6 months or so. And I expect the ongoing bills (Medicare premiums, tax bills) to become more manageable as I pay off the one time expenses. But right now, I need an infusion of about $20,000. I understand I'll be liable for income tax, but can I withdraw from the Voya account without penalty? Or is there a better option. Thank you.
Due to your age there is no penalty for the withdrawal just the income tax on the distribution.
However, you generally can’t withdraw funds from a 403B account if you are still employed by the plan sponsor. The fact that your employer changed account trustees does not change the fact that you are still employed by them and this may prevent you from making any withdrawals.
Your plan may allow hardship withdrawals. Hardship withdrawals are optional and the qualification rules are set by the employer; the IRS does not require employers to offer this option.
If you can’t make a regular withdrawal because you’re still employed and you can’t make a hardship withdrawal because you don’t qualify or it is not offered, you may have one more option. You may be able to do a direct rollover from your old plan to your new plan. This would increase the balance in your new plan and then you might be eligible for a loan.
Not sure about that, Opus 17. I think Critter-3 has it right. Most of what I read tells me that since I am over the age of 59½, I can withdraw from the Voya 403-b without penalty. But I like to check in with the people here in the TT Community. In fact, the Voya website, while not allowing me a loan, is allowing a withdrawal. I'm concerned about the 10% early withdrawal penalty, which I don't think applies, since I'm 66. I do think you're right about a plan to plan rollover, but I'd prefer not to drag this process out. If I had more time, I'd wait until January 1st. Thanks for your response.
There is no penalty on the form 5329 if you are over the age of 59.5 ... the 1099-R should have a code 7 in the box 7 on the 1099-R when issued.
Read the form instructions https://www.irs.gov/pub/irs-pdf/i5329.pdf
I looked it up and you are correct, you are allowed to make a withdrawal from a 403B plan after you reach age 59-1/2, even if you are still employed by the plan sponsor. This situation doesn’t come up very often on this forum and I had forgotten this exception to the rule.