Inherited 403(b) Rules: 10-Year Rule, Rollover to Inherited IRA, and Distribution Options

Teachers, hospital workers, university employees, and nonprofit staff are among the most common holders of large 403(b) accounts. If you've inherited one, you're navigating rules that overlap significantly with inherited IRAs — but with a few 403(b)-specific wrinkles that catch beneficiaries off guard.

What is a 403(b) plan?

A 403(b) plan — sometimes called a tax-sheltered annuity (TSA) or tax-deferred annuity (TDA) — is a defined-contribution retirement account available to employees of public schools, certain nonprofit organizations under IRC § 501(c)(3), and some government entities. Common employers include K-12 school districts, universities, hospitals, charities, and churches.

403(b) plans work similarly to 401(k) plans: employees defer pre-tax salary into the plan, contributions grow tax-deferred, and distributions are taxed as ordinary income. The 2026 elective deferral limit is $24,500 ($31,000 with the standard age-50 catch-up contribution; $35,750 for those ages 60–63 under the SECURE 2.0 super-catch-up rule).¹

A key structural difference from 401(k) plans: 403(b) accounts can be either custodial accounts (403(b)(7) — holding mutual funds or ETFs, similar to an IRA) or annuity contracts (holding group or individual fixed or variable annuities, most commonly issued by insurance companies like TIAA, Lincoln Financial, or MetLife). This distinction matters significantly for beneficiaries.

Does the SECURE Act 10-year rule apply to inherited 403(b)s?

Yes. The SECURE Act, effective January 1, 2020, amended IRC § 401(a)(9)(H) to impose the 10-year depletion rule on most non-spouse beneficiaries of qualified retirement plans — and IRC § 403(b)(10) explicitly incorporates § 401(a)(9) into 403(b) plans. If you inherited a 403(b) account from a decedent who died on or after January 1, 2020, the 10-year rule applies.²

The rule requires the entire account balance to be distributed by December 31 of the 10th year following the year of death. If the original owner died in 2022, your deadline is December 31, 2032.

Who is exempt from the 10-year rule?

The same Eligible Designated Beneficiary (EDB) categories that qualify for the stretch exception from inherited IRAs apply to inherited 403(b)s:

• Surviving spouse — may roll to own IRA or use the inherited account under spousal rules
• Minor child of the account owner — stretch until age 21, then 10-year window begins (not any minor child, only a child of the decedent)
• Disabled beneficiary (§ 72(m)(7))
• Chronically ill beneficiary (§ 7702B(c)(2))
• Not-more-than-10-years-younger beneficiary — sibling or friend close in age

Most adult children who inherit a parent's 403(b) are non-EDB beneficiaries subject to the full 10-year rule.

Annual RMDs during the 10-year window: the T.D. 10001 split

IRS final regulations T.D. 10001 (July 2024) apply to 403(b) plans through § 403(b)(10)'s incorporation of § 401(a)(9). The same pre-RBD vs. post-RBD split that governs inherited IRAs governs inherited 403(b)s:

Decedent died before their Required Beginning Date (pre-RBD)

No annual RMDs are required in years 1–9. The only requirement is full depletion by December 31 of year 10. You can take nothing for nine years and distribute the entire balance in year 10 — or take annual distributions in any amount and timing that works for your tax situation.

The Required Beginning Date (RBD) for a 403(b) plan is April 1 following the year the participant turns 73 (for those born between 1951 and 1959) or April 1 following the year they turn 75 (born 1960 or later), per SECURE 2.0.³ The "still working" exception may have applied during the owner's lifetime — if they were still employed by the plan sponsor past age 73 or 75, they may not have needed to take RMDs from that plan. At death, the still-working exception ends and post-death rules take over.

Decedent died on or after their Required Beginning Date (post-RBD)

Annual RMDs are required in years 1–9, calculated using the Single Life Expectancy Table (Pub. 590-B, updated 2022 via T.D. 9930) based on the beneficiary's age in the year after death. The remaining balance must still be fully depleted by December 31 of year 10.

The 2021–2024 IRS waiver notices (Notices 2022-53, 2023-54, 2024-35) excused certain missed annual RMDs for inherited accounts during that period. Those waivers have expired. Annual RMDs from post-RBD decedent inherited 403(b) accounts for 2025 and later are required; missed distributions are subject to a 25% excise tax under IRC § 4974, reducible to 10% if corrected within the correction window.

Year-of-death RMD

If the 403(b) owner died after their RBD but had not taken their full RMD for the year of death, that shortfall must be taken by December 31 of the year of death. The calculation uses the decedent's prior-year account balance and their Uniform Lifetime Table factor for their age in the year of death. As a beneficiary, you're responsible for completing this distribution if the decedent hadn't already done so. This applies to inherited 403(b)s and inherited IRAs equally.

Direct rollover to an inherited IRA: how it works

Rolling an inherited 403(b) to an inherited IRA at a custodian of your choice is usually the best move for non-spouse beneficiaries. It gives you better investment options, lower costs (especially versus old group annuity contracts), and easier coordination with your other planning. Here's how the process works:

Legal authority: IRC § 402(c)(11) via § 403(b)(8)(B)

Section 402(c)(11), added by the Pension Protection Act of 2006 and incorporated into 403(b) plans via § 403(b)(8)(B), allows a non-spouse designated beneficiary to roll an inherited employer plan balance directly to an inherited IRA. Since 2010, plans have been required to offer this option — you cannot be forced to take a lump-sum distribution simply because you're not the surviving spouse.⁴

The transfer must be direct (trustee-to-trustee)

Unlike rollovers for your own retirement account, a non-spouse beneficiary cannot receive the distribution and re-deposit it within 60 days. The transfer must go directly from the 403(b) plan to the inherited IRA custodian. Specifically:

• Contact the receiving custodian (Fidelity, Vanguard, Schwab, etc.) first — open an inherited IRA in your name as beneficiary
• Request a direct rollover from the 403(b) plan administrator to the new custodian
• The new account title must reflect the inherited nature: "Jane Doe, Deceased, [Plan Name] FBO John Doe, Beneficiary" (exact titling varies by custodian)

If the 403(b) plan issues you a check made out to you personally, that is a taxable distribution — not a rollover — and cannot be redeposited. Insist on a direct rollover payable to the new custodian.

The 10-year clock continues from the original death year

Rolling an inherited 403(b) to an inherited IRA does not reset the 10-year depletion clock. If the decedent died in 2023, your deadline is December 31, 2033 — whether the funds remain in the 403(b) plan or are moved to an inherited IRA.

When you cannot roll over: the plan refusal scenario

Before 2010, plans could refuse to offer the inherited rollover option. If you inherited a 403(b) from a pre-2010 death and the plan refused, you were stuck taking distributions from the plan per its own terms. For post-2010 deaths, all qualified plans must offer the rollover to a non-spouse designated beneficiary — if the plan administrator refuses, escalate to the plan sponsor's HR department and cite § 402(c)(11).

The pre-1987 403(b) balance: a lifetime rule that ends at death

403(b) plans have a unique grandfathering provision that does not exist in 401(k) or traditional IRA plans. Under IRS regulations, if a 403(b) account separately tracked contributions made before January 1, 1987, that pre-1987 balance was exempt from the normal lifetime RMD rules. The owner did not have to take distributions from the pre-1987 balance based on age-73 / age-75 RMD calculations — those funds simply accumulated, with distributions deferred until the participant reached age 75 or retired.

At death, this exception ends. Once the account owner dies, the post-death distribution rules under the SECURE Act apply to the entire account — including any pre-1987 balance. As a beneficiary, you face the 10-year depletion deadline on the full account balance with no carve-out for the pre-1987 portion. The pre-1987 exception was purely a lifetime benefit for the account owner.

Practical note: most custodians did not separately track pre-1987 balances with precision. If the account statement does not show a pre-1987 balance sub-account, this issue is moot.

Inherited 403(b) annuity contracts: the TIAA problem

Many 403(b) participants — especially at universities and nonprofits — hold their accounts as insurance company annuity contracts rather than custodial accounts. The most common is TIAA Traditional Annuity. This creates distribution complications that don't apply to inherited 401(k)s or IRAs:

Annuity contracts vs. custodial accounts

• Custodial accounts (403(b)(7)): Hold mutual funds or ETFs. Behave like IRAs from the beneficiary's perspective. Direct rollover to an inherited IRA is straightforward.
• Fixed annuity contracts (e.g., TIAA Traditional): The insurance company holds the funds and guarantees a return. If the contract was in "accumulation phase" (not annuitized), a lump-sum withdrawal or direct rollover is typically available but may be subject to "transfer payout annuity" (TPA) rules at TIAA — meaning distributions may be paid over 9 annual installments rather than as an immediate lump sum.
• Variable annuity contracts (e.g., TIAA CREF): Hold sub-accounts invested in mutual fund-like pools. Generally more flexible; direct rollover to an inherited IRA is typically available.

What to do with an inherited TIAA contract

TIAA's beneficiary distribution rules depend on whether the original contract was in accumulation or annuity-payment mode. As a beneficiary of a TIAA Traditional Annuity, you typically have these options:

1. Lump-sum withdrawal — fully taxable in the year received; counts as ordinary income. Simplest but potentially highest-tax option.
2. Transfer Payout Annuity (TPA) — TIAA pays out the inherited balance in 9 annual installments. The funds stay in TIAA's fixed-interest environment during payout. This may or may not satisfy the 10-year rule depending on the death year and payout schedule.
3. Rollover to inherited IRA — if the plan allows and the contract permits, you can transfer the inherited TIAA balance to an inherited IRA at another custodian. Contact TIAA directly — the process varies by contract type and employer plan rules.

The key risk: if TIAA's default payout schedule does not empty the account by December 31 of year 10, you could face the 25% excise tax on undistributed amounts. Review the TPA payout schedule against your 10-year deadline and make sure the plan's distribution options can satisfy the SECURE Act requirement.

Inherited Roth 403(b)

If the 403(b) account included Roth 403(b) contributions (after-tax salary deferrals), the inherited Roth 403(b) portion follows the same 10-year rule — but with no annual RMDs, since Roth accounts have no Required Beginning Date.

Starting in 2024, SECURE 2.0 eliminated the required minimum distributions from Roth 403(b) accounts during the account owner's lifetime, aligning them with Roth IRAs. This means most Roth 403(b) account owners who died in 2024 or later had no RBD — so beneficiaries face the 10-year rule with no annual RMD obligation (pre-RBD decedent treatment).

Note: After rolling an inherited Roth 403(b) to an inherited Roth IRA, the 5-year rule for tax-free earnings distributions uses the original owner's Roth 403(b) first-contribution year — not the rollover date. Keep records of the original plan's Roth start date.

Surviving spouse: unique options

A surviving spouse who inherits a 403(b) account has more flexibility than a non-spouse beneficiary:

• Spousal rollover to own IRA or own 403(b): Treats the inherited 403(b) as if it were always the spouse's own account. No 10-year rule; subject only to the surviving spouse's own RMD schedule. This is almost always the right choice for surviving spouses who don't need immediate income — it eliminates the depletion clock.
• Maintain as inherited 403(b): If the surviving spouse is under 59½ and needs income before that age, maintaining the inherited account allows penalty-free distributions immediately. A surviving spouse can later roll to their own IRA if they no longer need the early-access benefit.
• Delay rollover decision: A surviving spouse does not have to roll over immediately. They can defer the decision until they have modeled the optimal timing — considering their age, income needs, and whether delaying the RBD on the rolled-over funds saves more in taxes than having early-penalty-free access to the inherited account.

Comparison: inherited 403(b) vs. inherited 401(k) vs. inherited traditional IRA

Tax planning: the same 10-year toolkit applies

Because an inherited 403(b) and an inherited traditional IRA are taxed identically once the funds are in distribution, the planning strategies are the same:

• Bracket management across 10 years: Model your income across the full 10-year window before choosing an annual distribution amount. If you're a teacher-beneficiary who plans to retire in year 4 of the window, you may want to concentrate distributions in lower-income retirement years. Use the 10-Year Withdrawal Optimizer to model scenarios.
• Front-load in income gaps: If you have a low-income year early in the 10-year window — career transition, parental leave, sabbatical — take larger distributions then rather than in peak-earnings years.
• Roth conversion coordination: You cannot convert a non-spouse inherited account to Roth directly. But you can take an annual distribution from the inherited 403(b), pay the ordinary income tax, and simultaneously Roth-convert a similar amount from your own traditional IRA, "filling up" a bracket and net-converting without increasing your total tax load. See the Roth Conversion Coordinator.
• QCDs if you're 70½+: Qualified Charitable Distributions from your own IRA (up to $111,000 in 2026) reduce your AGI, creating bracket room for larger inherited-403(b) distributions without hitting higher marginal rates or IRMAA thresholds.⁵
• Avoid the year-10 lump-sum tax bomb: The most common mistake for inherited 403(b) beneficiaries is taking no distributions for 9 years and then facing a massive year-10 forced distribution. A $500,000 account growing at 6% for 9 years becomes $845,000 — all taxable in one year, pushing most of it into the 32–37% bracket. Spreading distributions over the window is almost always better.

Also review the IRMAA interaction if you're in your 60s: large inherited 403(b) distributions in the 2 years before Medicare enrollment can spike Medicare Part B and D premiums via the IRMAA lookback. The IRMAA guide covers the timing strategies.

Sources

1. IRS Publication 571 (01/2026) — Tax-Sheltered Annuity Plans (403(b) Plans). For 2026: elective deferral limit $24,500; age-50 catch-up $8,000; ages 60–63 super-catch-up $11,250 per SECURE 2.0. Contribution rules, plan types, and distribution overview for 403(b) participants. (Verified May 2026.)
2. IRS — Retirement Topics: Beneficiary. SECURE Act 10-year depletion rule for non-EDB beneficiaries applies to 403(b) plans via IRC § 403(b)(10)'s incorporation of § 401(a)(9)(H). EDB categories, 10-year depletion requirement, and surviving spouse options for employer plans.
3. IRS — Retirement Plan and IRA Required Minimum Distributions FAQs. Required Beginning Date rules for 403(b) plan participants: April 1 following the year of age 73 (born 1951–1959) or age 75 (born 1960+), per SECURE 2.0. Still-working exception applies during the participant's lifetime; ends at death.
4. IRS — Rollovers of Retirement Plan and IRA Distributions. IRC § 402(c)(11) extends the direct rollover to inherited IRA option to non-spouse designated beneficiaries of employer plans including 403(b) plans. Plans have been required to offer this option since 2010. Direct transfer only; no 60-day rollover permitted for non-spouse beneficiaries.
5. IRS Publication 590-B — Distributions from Individual Retirement Arrangements (IRAs). Qualified Charitable Distribution rules: 2026 limit $111,000 per IRS inflation adjustment; beneficiaries age 70½+ can use QCDs from their own IRA to reduce AGI and create bracket room for inherited account distributions. T.D. 10001 annual RMD rules, Single Life Expectancy Table, excise tax under IRC § 4974.

Tax values verified as of May 2026. The SECURE Act 10-year rule (IRC § 401(a)(9)(H)) applies to 403(b) plans via § 403(b)(10). T.D. 10001 (July 2024) annual RMD rules apply. Direct rollover to inherited IRA for non-spouse beneficiaries is governed by IRC § 402(c)(11) as incorporated through § 403(b)(8)(B). Consult a tax advisor for your specific situation.