Regulatory Updates

In-Kind Distribution of Terminating 403(b) Accounts

November 5, 2020 – The IRS has issued Revenue Ruling (Rev.Rul.) 2020-23, which describes the status and tax treatment of certain 403(b)(7) custodial accounts belonging to participants or beneficiaries of terminating 403(b) plans.

Briefly, Rev. Rul. 2020-23 states that if such in-kind-distributed custodial accounts comply with the conditions in this guidance, they will retain their tax-deferred status as 403(b) custodial accounts, until such time as the assets they contain are actually paid out to the participant or beneficiary to whom they belong. This guidance is being further analyzed, and additional information will be shared as appropriate.