What Replaced the 90-24 Transfer
Teachers who have been in the system a while may remember the "90-24 transfer." That rule was eliminated when the IRS finalized current 403(b) regulations. In its place are two distinct mechanisms: the contract exchange and the plan-to-plan transfer. Which one applies to you depends entirely on whether you have had a "distributable event" — generally, separation from your employer or reaching age 59½ if your plan allows in-service withdrawals.
If You Are Still Employed: The Contract Exchange
While you are actively working for the district, you generally cannot roll your 403(b) out to an IRA or a different employer's plan — there has been no distributable event, so there is nothing to roll over. What you can often do is a contract exchange: moving your existing balance from one approved vendor to a different approved vendor within your own district's vendor list, without a distribution occurring.
A contract exchange requires that the new contract carry the same distribution restrictions as the old one, and the new vendor must be able to share plan compliance information with your employer. This is why a contract exchange is generally limited to vendors already on your district's approved list — you usually cannot exchange into a provider your district hasn't approved.
After You Separate From Employment: The Rollover
Once you leave the district — whether by retirement, resignation, or moving to a new employer — you have had a distributable event, and a true rollover becomes available. You can generally roll your 403(b) into an IRA, into a new employer's 403(b) or 401(k) if that plan accepts rollovers, or in some cases roll pre-tax dollars into a Roth IRA (though that specific move is treated as a taxable Roth conversion, not a tax-free rollover).
Always request a direct rollover, where the funds move institution-to-institution without passing through your hands. An indirect rollover, where a check is issued to you first, triggers mandatory 20% federal withholding and a 60-day window to redeposit the full original amount — including the withheld 20% out of your own pocket — to avoid taxes and penalties.
If You Are in an Annuity: Watch the Surrender Clock
Annuity-based 403(b) contracts often apply surrender charges on a rolling basis — each individual contribution starts its own multi-year surrender clock. A common practical strategy: stop new contributions to the expensive vendor first, so you stop adding fresh money to the surrender clock, then evaluate whether the annual fee savings from moving justify paying the surrender charge on what is already in the account, or whether it makes more sense to wait out the remaining surrender period on older contributions while directing new money elsewhere.
A 1035 exchange allows an annuity-to-annuity transfer without triggering immediate taxation, which can be useful for moving from a high-cost annuity to a lower-cost one — but it does not automatically waive any surrender charge written into your existing contract.
The Practical Steps
- Contact your district's benefits office or third-party administrator (TPA) to get your current vendor list and transfer paperwork.
- Confirm whether you are doing a contract exchange (still employed) or a rollover (separated from service).
- Check your existing contract for surrender charges and calculate the surrender clock before initiating a move.
- Always request a direct transfer or direct rollover, not a check made out to you.