OKC73134

Dual Status Hospital, Governmental and 501(c)3

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OKC73134    0

We have a new client who is a Hospital that currently holds dual status but is dropping the 501(c)3 status.  Currently have a 403(b).     They are adopting a new 457(b) and a 401(a) plan for employer match.     Assets are in 403b individual annuity accounts.   Nothing is changing regarding Employer other than non-profit status.     What are the options to move over those existing 403(b) balances to new successor plan?    Approximately 200 employees are not currently 100% vested in employer contribution.     Exchange or transfer does not apply since they are not going from 403b to 403b.    They do not want to 100% vest currently in the 403b plan.    Want to move match funds and retain vesting schedule.   

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I think your only option is going to be to just freeze the plan, and allow vesting to continue.  There really isn't any way to move the money to another type of plan without terminating it, which would require full vesting.

Treas. Reg. § 1.403(b)-10 allows an ineligible employer to maintain a 403(b) contract, so long as it makes no future contributions.

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OKC73134    0

Carol -   the current 403(b) plan is reflected as Non-Erisa.    Would that change any of the options?

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On 4/24/2017 at 10:28 AM, John Feldt ERPA CPC QPA said:

Does the partial plan termination rule for qualified plans, which requires 100% vesting, apply to a 403(b) plan when it is frozen?

No, it doesn't. It's a qualification rule, not a 403(b) rule.

 

On 4/24/2017 at 10:19 AM, OKC73134 said:

Carol -   the current 403(b) plan is reflected as Non-Erisa.    Would that change any of the options?

Any governmental plan is going to be non-ERISA.  But the plan presumably calls for the continued vesting.  As a contractual matter, I don't know how you get out of complete vesting if you completely terminate the plan and thus cease to allow future vesting.

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