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Transfer of Interest in 403(b) Contract: 403(b) Retirement Plans (2026 IRS Guide)

This guide covers “Transfer of Interest in 403(b) Contract” within 403(b) retirement plans. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 571 (01/2026), Tax-Sheltered Annuity Plans (403(b) Plans), published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Transfer of Interest in 403(b) Contract

Contract exchanges.

If you transfer all or part of your interest from a 403(b) contract to another 403(b) contract (held in the same plan), the transfer is tax free, and is referred to as a “contract exchange.” This was previously known as a 90-24 transfer. A contract exchange is similar to a 90-24 transfer with one major difference. Previously, you were able to accomplish the transfer without your employer’s involvement. After September 24, 2007, all such transfers are accomplished through a contract exchange requiring your employer’s involvement. In addition, the plan must provide for the exchange and the transferred interest must be subject to the same or stricter distribution restrictions. Finally, your accumulated benefit after the exchange must be equal to what it was before the exchange.

Transfers that don’t satisfy this rule are plan distributions and are generally taxable as ordinary income.

Plan-to-plan transfers.

You may also transfer part or all of your interest from a 403(b) plan to another 403(b) plan if you are an employee of (or were formerly employed by) the employer of the plan to which you would like to transfer. Both the initial plan and the receiving plan must provide for transfers. Your accumulated benefit after the transfer must be at least equal to what it was before the transfer. The new plan’s restrictions on distributions must be the same or stricter than those of the original plan.

Tax-free transfers for certain cash distributions.

A tax-free transfer may also apply to a cash distribution of your 403(b) account from an insurance company that is subject to a rehabilitation, conservatorship, insolvency, or similar state proceeding. To receive tax-free treatment, you must do all of the following.

  • Withdraw all the cash to which you are entitled in full settlement of your contract rights or, if less, the maximum permitted by the state.

  • Reinvest the cash distribution in a single policy or contract issued by another insurance company or in a single custodial account subject to the same or stricter distribution restrictions as the original contract not later than 60 days after you receive the cash distribution.

  • Assign all future distribution rights to the new contract or account for investment in that contract or account if you received an amount that is less than what you are entitled to because of state restrictions.

In addition to the preceding requirements, you must provide the new insurer with a written statement containing all of the following information.

  • The gross amount of cash distributed under the old contract.

  • The amount of cash reinvested in the new contract.

  • Your investment in the old contract on the date you receive your first cash distribution.

Also, you must attach the following items to your timely filed income tax return in the year you receive the first distribution of cash.

  1. A copy of the statement you gave the new insurer.

  2. A statement that includes:

    1. The words ELECTION UNDER REV. PROC. 92-44,

    2. The name of the company that issued the new contract, and

    3. The new policy number.

Direct trustee-to-trustee transfer.

If you make a direct trustee-to-trustee transfer from your governmental 403(b) account to a defined benefit governmental plan, it may not be includible in gross income.

The transfer amount isn’t includible in gross income if it is made to:

  • Purchase permissive service credits; or

  • Repay contributions and earnings that were previously refunded under a forfeiture of service credit under the plan, or under another plan maintained by a state or local government employer within the same state.

After-tax contributions.

For distributions beginning after December 31, 2006, after-tax contributions can be rolled over between a 403(b) plan and a defined benefit plan, an IRA, or a defined contribution plan. If the rollover is to or from a 403(b) plan, it must occur through a direct trustee-to-trustee transfer.

Permissive service credit.

A permissive service credit is credit for a period of service recognized by a defined benefit governmental plan only if you voluntarily contribute to the plan an amount that doesn’t exceed the amount necessary to fund the benefit attributable to the period of service and the amount contributed is in addition to the regular employee contribution, if any, under the plan.

A permissive service credit may also include service credit for up to 5 years where there is no performance of service, or service credited to provide an increased benefit for service credit which a participant is receiving under the plan.

Check with your plan administrator as to the type and extent of service that may be purchased by this transfer.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.

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