Can a 403(b) Annuity in Voya Be Transferred to an IRA in Fidelity?

Transferring a 403(b) annuity from an employer-sponsored plan, such as Voya Financial, to an individual retirement account (IRA) at Fidelity is possible but subject to certain conditions. This process can be complex, involving various factors that affect the transferability and the process itself.

Conditions for Transfer

The transfer of a 403(b) annuity to an IRA in Fidelity can be initiated, but it is not without restrictions and requirements. Below are the key points to consider:

Eligibility

First and foremost, you must meet the eligibility criteria stipulated by the 403(b) plan. Typically, participants cannot be working for the employer sponsoring the 403(b) plan anymore in order to initiate a distribution or a direct rollover. Being 'separated from service' is a critical condition, indicating that you have stopped working for that organization permanently or temporarily due to retirement, a reduced work schedule, or a layoff.

Type of Annuity

The type of annuity in the 403(b) plan also significantly influences the transferability and the process:

Variable Annuity: These typically comprise mutual funds, money markets, and other similar investment options. Transferring a variable annuity to an IRA is generally straightforward. Participants can initiate a direct rollover, where the custodian directly transfers the funds to the Fidelity IRA without the participant receiving the check. This method is relatively easier and more common. Fixed Annuity: Should any portion of the annuity be a fixed annuity (such as TIAA’s traditional annuity), the transfer process becomes more complicated. Fixed annuities do not allow for direct rollovers. Instead, the funds must be withdrawn in substantially equal annual payments, spread over a 10-year period, or according to the specific terms of your plan. Further, these withdrawals may be subject to a 10% early withdrawal penalty unless you meet certain exceptions, such as retirement age or hardship withdrawals.

Plan-Specific Restrictions

In addition to the general conditions, the transfer may also be contingent on the specific provisions of your 403(b) plan. For instance, if you hold funds in a traditional annuity that meet specific tenure requirements (e.g., less than five years), you may be subject to penalty fees for withdrawals or rollovers that occur within a short time frame.

Direct Rollover Process

A direct rollover from a 403(b) to an IRA in Fidelity involves a few more steps compared to a traditional transfer:

Custodial Transfer: The custodian of the 403(b) plan (e.g., Voya) directly pays the funds to the custodian of your Fidelity IRA without sending the funds to the participant. This minimizes the risk of the funds being subject to taxes or penalties. Taxability: Even though it's a direct rollover, the funds are still considered a distribution to the participant. The participant then has the responsibility to contribute the funds to an IRA without incurring taxes or penalties if done within 60 days.

While a direct rollover provides a way to move funds from one plan to another without the funds leaving your custody, the process still requires careful planning to meet the time constraints and to avoid any unintended tax implications.

Conclusion

In summary, the transfer of a 403(b) annuity to an IRA in Fidelity is an intricate process that requires careful planning and compliance with specific conditions and plan requirements. Participants must ensure they meet the separation from service criteria, understand the type of annuity in their plan, and be aware of any plan-specific restrictions. By following the above guidelines, you can successfully transfer your funds in a way that aligns with your retirement savings goals and minimizes potential tax burdens.