A 403(b) rollover can cut years of fees, but timing and tax rules decide whether it helps. Here is how to tell, for Texas public school employees.
Texas public school employees usually have up to three retirement accounts, and they follow different rules. The TRS pension is the foundation and is rarely worth touching. A 403(b), sometimes still called a TSA or tax-sheltered annuity, is where most of the rollover questions live. A 457(b), if your district offers one, has a withdrawal advantage worth protecting.
Until September 1, 2019, TRS certified the companies that could sell 403(b) products to Texas school employees, and its rules capped the fees those products could charge. House Bill 2820 ended that. As TRS told members in July 2019, it “will no longer certify 403(b) companies nor will TRS maintain a list of registered 403(b) investment products.” The Texas Department of Insurance and the State Securities Board still regulate the products, but no state agency caps their fees, and teachers choose from whatever their district offers. TRS’s fee guide still explains each type of charge.
Older 403(b) annuities often stack several charges: mortality and expense fees, administrative fees, fund expenses inside the annuity and optional rider fees. Each one looks small. Together, over a career, they add up.
Hypothetical example for illustration: a steady 6% gross return, compounded annually, with fees deducted each year. Real returns vary and are not guaranteed.
Most of the teacher 403(b)s I review are worth moving once the timing is right. The exceptions below are about timing and tax rules, not about the old account being a better product, so check every one of them before you sign anything.
Your TRS pension already gives you lifetime income, so a teacher often needs less guaranteed income from an annuity than someone without a pension. I look at the pension first, then decide whether any of the 403(b) needs guarantees at all. When replacing an existing annuity makes sense.
Sources: IRS, rollovers of retirement plan and IRA distributions and IRS, exceptions to the tax on early distributions.
The 403(b) and 457(b) limits are separate, so a teacher whose district offers both can put up to $49,000 into the two plans in 2026 before catch-ups. New this year: if your 2025 FICA wages from your district were above the law’s threshold, your catch-up contributions must go in as Roth. The statute sets that threshold at $145,000 and adjusts it for inflation (section 414(v)(7)); plan administrators are applying $150,000 for 2026, so confirm with yours.
Limits from IRS news release IR-2025-111 (November 13, 2025) and the IRS cost-of-living adjustment table. Your plan’s own rules apply.
In its 2018 pension benefit design study, TRS reported that 96% of Texas public school employees do not participate in Social Security, so for many teachers the TRS pension and their own savings are the whole plan. The Social Security Fairness Act, signed January 5, 2025, ended the Windfall Elimination Provision and Government Pension Offset for benefits payable from January 2024. If you also earned Social Security from another job or through a spouse, your benefit is no longer reduced because of your TRS pension. Check your current estimate before planning around it.
Texas 403(b) regulation: TRS, TRS member update, July 2019 and the House Bill 2820 bill analysis. TRS refunds: TRS refund guide. Social Security participation: TRS pension benefit design study, December 2018. Distribution, rollover and penalty rules: IRS Publication 571, IRS guidance and the Internal Revenue Code sections linked above. 2026 limits: IRS news release IR-2025-111. Plan rules vary by district and vendor, and tax rules change. This page is general education, not tax, legal or investment advice. Confirm tax treatment with a CPA before you move any retirement account.
Usually not before 59½. Federal rules generally keep your own 403(b) contributions in the plan until you leave the district, turn 59½, become disabled or die. While you work, you can usually move to a lower-cost vendor your district offers.
Not anymore. Since September 1, 2019, under House Bill 2820, TRS no longer certifies 403(b) companies or keeps a list of registered products, and its former fee caps no longer apply. The Texas Department of Insurance and the State Securities Board still regulate the products. Compare total costs yourself, in writing.
Almost never, once you have five years of service credit. A refund returns only your own contributions plus interest; state and employer contributions are not refundable, and the refund ends your service credit and your right to TRS benefits. With five years, you can leave the money with TRS and apply for a monthly benefit at retirement age.
Often not, if you might need the money before 59½. The IRS states that governmental 457(b) distributions are not subject to the 10% additional tax, except money rolled in from another plan or IRA. Rolling into an IRA or annuity gives that up.
If you leave the district in or after the year you turn 55, you can take withdrawals from that 403(b) without the 10% early-withdrawal penalty. The tax code applies this exception to employer plans, including 403(b) annuity contracts, but not to an IRA you roll it into.
Not on a direct rollover to a traditional IRA or annuity, sent company to company. If the plan pays you instead, it must withhold 20%, and you have 60 days to deposit the full amount or the shortfall becomes taxable. Moving pre-tax money to a Roth IRA is a conversion, and income tax is due.
$24,500 each for 403(b) and 457(b) plans, which are separate limits. Catch-up contributions add $8,000 at 50 and over, or $11,250 at ages 60 to 63, per IRS news release IR-2025-111. Higher earners must make catch-ups as Roth; plan administrators are applying a $150,000 threshold on 2025 FICA wages.
