Does Averaging Apply to 403(b)s?

Q: My client’s CPA has told him not to roll over his lump sum distribution from the 403(b) plan because of the ability to use 10-year averaging on the income tax consequence of the distribution. I had not heard of this and wonder if the CPA is correct.

A: While 10-year averaging does apply (to those born before 1936) to distributions from qualified plans, it does NOT apply to 403(b) plans at all. The CPA is incorrect.

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