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Tinman

403(b) Plan, Change of Vendor, Terminated Participants

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First - a disclosure - I don't know nuthin 'bout 403(b) plans. :wacko:

Our firm provides custodial and record keeping services for a 403(b) plan.

This plan is leaving us to go to a new vendor. There are 4 individuals in the plan who have separated service and the TPA is stating the new vendor will not accept the funds for these individuals as they won't have "applications" for them.

It is my understanding that a 403(b) cannot do a force out (as in 401(k)-land) - and keeping the funds of these four individuals here would keep the contract we have with the plan sponsor in force - and that's not what they want. I see nothing in our contract that allows us to force the sponsor to take all the accounts to a new vendor.

Suggestions please - what can be done with the account balances of these 4 terminated participants?

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Are you really the "custodian" of the accounts in the same sense that an investment firm might be the custodian of an IRA account?

If so I'm afraid you're stuck with holding on to the 4 accounts until the "owners" claim them pursuant to the terms of the plan and custodial agreement.

Sorta/kinda/almost like a custodian of SIMPLE IRA accounts where the employer stops sending contributions to custodian 1 and send future contributions to custodian 2 and some of the account owners decide to roll their accounts and others don't.

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Depending upon the size of the accounts of the terminated participants, the plan document may permit the administrator to request the individuals to take a distribution or IRA rollover, and in the absence of an election, force out the amounts. The plan administrator (or employer's HR office) could also be proactive, reach out to the terminated employees, and inform them of their options with respect to their account balances, including taking cash distributions or rollovers to the current plan or an IRA.

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