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401(k)athryn

Plan-to-Plan Transfer

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An employee terminates from Employer A and starts working for Employer B.  They are not related.  Both plans allow Plan-to-Plan transfers into and out of the plans. 

What is the benefit of this participant doing a Plan-to-Plan transfer instead of it just being done as a rollover?

Thanks!

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There is no withholding on a direct rollover.  Or a plan-to-plan transfer.  In both cases, the money would go from one plan to another and there is no taxable distribution.  I have no experience with plan-to-plan transfers that seem to be specifically available to 403(b) Plans and am needing to know why this would be more beneficial than the rollover.  It is not easier, in this case, as the two separate options are on the same withdrawal form.  Any other ideas?

 

Thank you!

 

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A plan to plan transfer is different than a direct rollover, which is why there is specific and different language in the plan document. A "transferred" benefit usually is more restricted and used in special circumstances - you almost always want to have a direct rollover.

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I was assuming you were talking about a "regular" rollover, where funds are first distributedt to the participant, rather than a "direct rollover." Hence my comment about the withholding, and being easier - one less step. If you are talking about a direct rollover, then life is good.

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The person needs to tighten up the terms in my opinion.  Can you even do a transfer from one plan to another for a terminee?  I have always understood a transfer to be a plan administrator/trustee initiated movement of money.  Most common example is you terminate an MP plan for example and you transfer all the money to the related 4k plan.   In this case you aren't asking the people if you want the money moved you are simply moving it.  How can you move a person's money to an unrelated plan without their permission?  Once you have their permission isn't a type of distributions?  if so, then it is a direct rollover not a transfer? 

I could be wrong on this but I have never seen something could be called a transfer from plan A to plan B that isn't related to distributed a terminated employee's account balance in all the decades I have been working in this field. 

It raises all kinds of questions.  In the transfer used in the example above you have to keep all protected benefits so you would still have to offer J&S on the MP money.  Is that true if you do a transfer to an unrelated plan?  Who would accept an unrelated plan's restrictions like that? 

 

So is this person talking about a direct rollover or a plan to plan transfer the words matter? 

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This concept seems meaningful only in terms of a DC plan.  Also, it seems likely a plan-to-plan transfer implies moving assets in kind.  Possible, but I think most plan sponsors and/or trustees would prefer to avoid it.

 

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