Jump to content
Sign in to follow this  
KevinMc

401-k to 403-B

Recommended Posts

I have a non profit school for special needs children that currently has a 401-k plan and are wanting to switch it to a 403-B. Is there any benefit to doing this? Are all 403 B plans required to file a 5500 each year and maintain a legal plan document. If there is an advantage what are the rules with regard to when can it be done and what kind of notification has to be provided to participants, IRS, etc.? Any help is appreciated....

Share this post


Link to post
Share on other sites

It would help if you stated why you want to switch to a 403(b) plan, other than someone is trying to sell you on one. Otherwise you are asking people to speculate about advantages relative to your circumstances. In particular, please state if the employer intends to provide nonelective contributions and if the employer intends to exclude anyone from participation.

Share this post


Link to post
Share on other sites

There are, in general, two advantages to a 403(b) plan. First, if there are only employee pretax employee contributions (no employer matching or other employer contributions), and certain Department of Labor requirements are met, the plan is not subject to ERISA and therefore escapes Form 5500 and other ERISA requirements. Second, so long as all employees are permitted to make contributions, the nondiscrimination rules do not apply, so you don't have to run ADP tests.

The disadvantages of a 403(b) plan are that the fees are often higher than with a 401(k), and there are fewer providers (meaning competition is less, and it may be harder to find one with a good investment return).

You'll just need to look at all the pros and cons in your situation to figure out which works best for you.

Share this post


Link to post
Share on other sites

Ok, thanks. It sounds like if there are not going to be ER contributions it could be set up as a non ERISA 403 b and avoid testing and reporting requirements.

What kind of notice has to be given to change from the 401-k to the 403-B if we decide to make the change.....

Share this post


Link to post
Share on other sites

You cannot change a 401(k) to a 403(b). THe 401(k) must be terminated, distributed (or rolled over) and a 403(b) started as a new plan.

Share this post


Link to post
Share on other sites

If you think you are going to set up the plan so it will not be an ERISA plan, you need to do so advisedly. Notwithstanding the prevarications of the Department of Labor about its positions about what triggers ERISA, I think it is rare or impossible to have a non-ERISA 403(b) plan unless it is exempt under the government or church exemptions.

  • Like 1

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

×
×
  • Create New...