You can combine a 401(k) and a 403(b) by rolling one into the other, in either direction, without owing income tax at the time of the transfer. The IRS treats both as eligible retirement plans that can accept transfers from each other, so the money stays in a tax-deferred environment.1IRS.gov. Rollover Chart The transfer works cleanly when three things line up: the receiving plan accepts incoming rollovers, the account types match, and you use a direct trustee-to-trustee transfer rather than taking the money yourself.
Confirm the Receiving Plan Will Take the Money
Federal law sets the floor, but the receiving employer’s plan document has the final say. A plan must allow outbound direct rollovers when a participant requests one, but it is not required to accept incoming rollovers from outside plans.2eCFR. 26 CFR 1.401(a)(31)-1 – Requirement to Offer Direct Rollover of Eligible Rollover Distributions Some employers exclude roll-ins to keep administration simple. Before you touch any paperwork, call the receiving plan’s administrator and confirm they accept rollovers from your type of account.
Match Pre-Tax to Pre-Tax and Roth to Roth
Whether the rollover works depends on matching account types. Pre-tax 401(k) money can roll into a pre-tax 403(b), and pre-tax 403(b) money can roll into a pre-tax 401(k).1IRS.gov. Rollover Chart Designated Roth 401(k) money can roll into a designated Roth 403(b), and the reverse also works, but only through a direct trustee-to-trustee transfer. The receiving plan must separately track the Roth contributions and their earnings.
You cannot cross the streams. Designated Roth funds cannot roll into a traditional pre-tax account in the other plan. If you want to convert pre-tax money to Roth, that conversion would generally go to a Roth IRA, and the full converted amount becomes taxable income for the year of the conversion.1IRS.gov. Rollover Chart Before you start, check whether each balance is pre-tax, Roth, or a mix, and make sure the receiving plan has the matching bucket.
When Your Current Plan Will Release the Funds
Even when the IRS permits the rollover, your current plan may not release the money until a qualifying event occurs. The common ones are:
- Separation from service (you leave the employer sponsoring the plan)
- Reaching age 59½, if the plan allows in-service distributions
- Disability or death
- Plan termination without a replacement
Leaving a job is the usual trigger. Once you separate, the former plan is generally required to let you take a distribution, including a direct rollover to another qualified plan.3Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions If you are still working for the plan sponsor and under 59½, your options are usually limited unless the plan specifically permits in-service rollovers, and many do not.
Use a Direct Rollover, Not an Indirect One
The single most important decision in this process is choosing a direct rollover. A direct rollover moves your money from one plan administrator to another without the funds passing through your hands. No taxes are withheld, and there is no 60-day clock.3Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions The originating plan issues a check made payable to the new plan for your benefit. The check may be mailed to you for forwarding, but because it is not payable to you personally, it is not treated as a distribution.
Why the Indirect Route Costs You
An indirect rollover is when the plan pays the distribution to you. If you go that way, the plan must withhold 20% of the taxable amount for federal income tax before sending you the check.4Internal Revenue Service. Topic No. 413, Rollovers From Retirement Plans On a $50,000 distribution, you receive $40,000 and the IRS gets $10,000 as a prepayment. To complete the rollover tax-free, you must deposit the full $50,000 into the new plan within 60 days, meaning you have to replace the withheld $10,000 out of pocket. Deposit only the $40,000 you received, and the missing $10,000 is treated as taxable income. If you are under 59½, an additional 10% early withdrawal penalty applies to that $10,000.5Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
The 60-day window is strict. Miss it, and the entire distribution becomes taxable income for that year.3Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions A direct rollover avoids every one of these problems.
Amounts That Cannot Be Rolled Over
Not every dollar in your account is eligible to move. Federal law excludes three categories from the definition of an eligible rollover distribution:6Office of the Law Revision Counsel. 26 USC 402 – Taxability of Beneficiary of Employees Trust
- Required minimum distributions. Once you reach age 73, the RMD for that year must come out separately and cannot be rolled anywhere.7Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
- Substantially equal periodic payments made over your life expectancy or over 10 years or more.
- Hardship distributions.
If you are close to 73 and planning to combine accounts, coordinate with both administrators so the year’s RMD is distributed before the remaining balance transfers. Your first RMD is due by April 1 of the year after you turn 73, and each subsequent RMD is due by December 31.7Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
Outstanding Plan Loans at Separation
If you have an unpaid 401(k) or 403(b) loan when you leave, the plan treats the outstanding balance as a distribution called a plan loan offset. Your account balance is reduced by the unpaid amount, and that offset becomes taxable income unless you roll it over.8Internal Revenue Service. Plan Loan Offsets
A loan offset caused by separation from service qualifies as a qualified plan loan offset, which extends your rollover deadline. You have until the due date of your federal income tax return, including extensions, to roll the offset amount into another eligible plan or IRA.9Internal Revenue Service. Retirement Topics – Plan Loans You have to fund that rollover contribution from other cash, since the offset money never reached you. The rest of the account, the portion not consumed by the loan, can still move as a normal direct rollover.8Internal Revenue Service. Plan Loan Offsets If a job change is on the horizon, paying the loan down before you leave avoids the whole scenario.
The Age-55 Exception You Could Lose
This one matters if you are between 55 and 59½. Leave your job in or after the year you turn 55, and distributions from that former employer’s 401(k) or 403(b) are exempt from the 10% early withdrawal penalty even though you are under 59½.5Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions Public safety employees of state or local governments get a similar exception starting at age 50.
The exception applies only to qualified employer plans, not to IRAs. Roll the money into an IRA and then take a withdrawal before 59½, and the 10% penalty applies regardless of when you left the job.5Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions If you might need part of the balance before 59½, keeping the money in an employer plan (either the original one or the new one you are rolling into) preserves that penalty-free access.
Steps to Initiate the Transfer
Once you have confirmed the receiving plan accepts your account type and a qualifying event has happened, the paperwork moves in a predictable order.
- Gather the legal name, account number, and mailing address for both plans.
- Ask the receiving plan for a Letter of Acceptance. Many originating plans require it before they will release funds.
- Complete the originating plan’s distribution forms and select the direct rollover option, naming the receiving plan.
- Check the signature requirement. Some providers require a Medallion Signature Guarantee, a specialized stamp available at a bank where you have an account. Others accept a standard notarized signature.10U.S. Securities and Exchange Commission. Medallion Signature Guarantees – Preventing the Unauthorized Transfer of Securities
Submit the package through the originating plan’s portal or by certified mail. Processing usually takes two to four weeks. In a direct rollover, the originating plan issues a check payable to the new plan for your benefit and either mails it to the receiving institution or sends it to you to forward.
Reporting the Rollover on Your Taxes
The originating plan will send you IRS Form 1099-R the following January, reporting the total distribution to you and to the IRS. For a direct rollover, the form should carry distribution code G, which tells the IRS the funds moved directly into another qualified plan and are not taxable.11Internal Revenue Service. Instructions for Forms 1099-R and 5498
You still report the rollover on your Form 1040. Enter the gross distribution on the pensions and annuities line, list the taxable amount as zero, and write “Rollover” next to the entry.4Internal Revenue Service. Topic No. 413, Rollovers From Retirement Plans If you used an indirect rollover, your final tax picture depends on your full-year income and whether you replaced the withheld 20% within 60 days.
Creditor Protection Can Change With the Destination
Most 401(k) plans are governed by the Employee Retirement Income Security Act, which shields plan assets from creditors in lawsuits and bankruptcy.12U.S. Department of Labor. FAQs About Retirement Plans and ERISA Some 403(b) plans, particularly those offered by churches and certain government employers, are not covered by ERISA. Those non-ERISA plans may offer weaker creditor protection, with the level depending on state law. If asset protection matters to you, weigh this before choosing which plan holds the combined balance.