pixmax Posted September 22, 2020 Report Share Posted September 22, 2020 Paychex set up a non profit 401k plan. No employer money, no loans etc. Can they terminate the 401k and start a Non ERISA 403b? Link to comment Share on other sites More sharing options...
Bri Posted September 23, 2020 Report Share Posted September 23, 2020 Quote Well, I found this on the ol' Google machine, if it helps in a pinch.... Link to comment Share on other sites More sharing options...
KaJay Posted September 23, 2020 Report Share Posted September 23, 2020 Yes. The 401(k) can be terminated and they can start a 403(b). Link to comment Share on other sites More sharing options...
Patricia Neal Jensen Posted September 23, 2020 Report Share Posted September 23, 2020 The issue here is not the "Successor Plan" issue. It is clear that a 401(k) can be terminated and a 403(b) started without the 12 month wait. The interesting issue is whether the 403(b) can be Non-ERISA. I could not find anything "spot on" about this question. The "Once ERISA; always ERISA rule is usually articulated with regard to "a plan." In other words, an ERISA 403(b) plan cannot be changed into a Non-ERISA 403(b) plan (same plan). It would seem possible to terminate the 401(k) and file a final 5500 and payout all the plan assets and then, as an unrelated matter, start a Non-ERISA 403(b). The Plan Sponsor must be very careful to avoid any involvement with the Non-ERISA 403(b) plan which would involve a judgement or discretionary determination. The issue of rollovers comes immediately to mind. Unless you can find a vendor for the Non-ERISA 403(b) which will assume all responsibility for rollovers, I think this area could be a problem* for your new Non-ERISA plan. This impacts the situation you describe because I do not think it will be possible to rollover the money from the terminated 401(k) into the Non-ERISA 403(b) unless you can find a vendor who will do it without plan sponsor input. *In Carol Calhoun's excellent piece "403(b) Plan Design and Compliance" (Published in 2018 in Lexis Practice Advisor), she notes that Plan to plan transfers would be prohibited exercises of discretion for a Non-ERISA plan. (Reading the entire section of her article on Non-ERISA plans would be a very good idea for the sponsor of the Non-ERISA plan.) Patricia Neal Jensen, JD Vice President and Nonprofit Practice Leader |Future Plan, an Ascensus Company 21031 Ventura Blvd., 12th Floor Woodland Hills, CA 91364 E patricia.jensen@futureplan.com P 949-325-6727 Link to comment Share on other sites More sharing options...
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