Leave of Absence – Options & Impact of a Leave on your 403B

When you take an unpaid leave of absence, your current employer has granted you permission to be absent from your scheduled duties; yet your position is held for you.   When you return from leave, you return to your previous position and duties.

The most often question I am asked is “I am on leave, how can/how do I cash out my 403(b)?”

On leave does not mean you have terminated employment.   Remember while you are on leave, your position is being held for you; therefore, the employer deems you as ‘inactive’ not ‘terminated’. The IRS 403(b) Code states, to qualify for a distribution from your 403(b) one of the following criteria needs to be met:

  • You are age 59 ½ or older
  • You have terminated employment from your employer.

While on leave:

  • You do not receive a paycheck from your employer; therefore, contributions are not made to your 403(b).
    • You cannot contribute on your own, contributions to a 403(b) must be made through payroll deduction.
  • Your 403(b) will continue to be invested as directed, you may change your investment allocations at any time within the investment options available.
  • When you return from leave, you may resume contributions to your 403(b) through payroll deduction.
    • At this time, you may need to complete a new Salary Reduction Agreement with your benefits or payroll department stating the amount you want to contribute to your 403(b) each pay check.

You choose not to return to your employer at the end of leave:

If you decide not to return your 403(b) remains invested.   You may keep your 403(b) invested with Empower, you may roll it to your new employer’s retirement plan or IRA, or you may cash out your account. 

If you have additional questions regarding your 403(b) financial planning or financial coaching, please visit my website www.classic–financial.com.   Click on the green Book an Appointment button in the upper righthand corner of the homepage to schedule a time to talk with me.


This material was created for educational and information purposes only and is not intended as ERISA, tax, legal or investment advice.   If you are seeking investment advice specific to your needs, such advice services must be obtained on your own, separate from this educational material.