IRS TO CHANGE 403 (b) RETIREMENT PLANS

IRS to change 403 (b) retirement plans. In an effort to streamline the regulation that governs how retirement accounts can be used, the IRS has proposed a change for 403 (b) plans–a type of workplace retirement plan used mostly by public and non-profit employees. Employer sponsored plans are powerful retirement tools and boast specific requirements regarding required minimum distributions and tax treatment that vary depending on the type of account. But soon your 403 (b) may resemble the more common 401 (k). If you have a 403(b) retirement plan, you might need to change how you’ve planned for retirement and how your plan beneficiaries will receive their funds. IRS to change 403 (b) retirement plans.

In accordance with the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, the IRS is proposing updates to the existing retirement plan code that governs required minimum distributions. Currently, 403(b) plans are still treated differently from 401(k) plans, with provisions that trigger special exemptions for the non-profit and service sector organizations that sponsor these plans for their employees. The IRS historically treated 403(b) plans like individual retirement accounts (IRAs), not requiring account holders to withdraw all their funds over their lifetimes and allowing savers to invest in a wide variety of financial products with tax deferred dollars. However, with changes ushered in by the SECURE Act, both 40a(k) plans and IRAs now require the participant to take minimum required distributions by age 72. Roth IRAs continue to be an exception.

In order to make 403(b) plans more like the other defined contribution plans, the IRS is proposing a new requirement starting at age 72, or upon retirement, account holders will be required to take minimum distributions based on published life expectancy guidelines.

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