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Post Merger - Entity has 2 403(b) Plans and 2 401(k) PLans


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Both 403(b) plans are subject to ERISA.  The 2 401(k) Plans will be merged.  The 401(k) Plans are Safe Harbor plans.  It is my understanding that the 403(b) Plans could be terminated and the employees would have a distributable event and that the distributions must be made within 12 months and they could rollover the assets to the 401(k) plan but are not required to do so.

Is there anything that would prevent the plan termination of the 403(b) Plans on 6/30/2022 with the covered employees becoming immediately eligible for the existing 401(k) plan on 7/1/2022?

I know if this were 401(k) Plans, the only option would be to merge the plans but because this is a 403(b) Plan, it cannot be merged into the 401(k).  Thanks!

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What says they aren't already eligible for the 401k as a result of the entity merger?  Was past service to be recognized by the remaining entity that would satisfy eligibility?  Very easy to amend the 401k to bring the previously 403b-covered employees into the 401k instead.  Then the termination of the 403b, or at least the 'freezing' of the deferrals stops new monies going there.

You are correct that the 403 can't be merged into the 401k, but someone, more well-read than I, may be able to say if a 408 transfer could allow you to move the active employee 403 accounts into the resultant 401k plan.

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401Kology: You are correct.   Be careful to distribute the 403(b) accounts within the 12 month period. Also correct that you cannot merge the plans under the current law.  Employees must enroll in the 401(k) to start deferrals into that plan.  Nothing about the 403(b) is "transferable" to the 401(k).  Entirely different code sections.

Patricia Neal Jensen, JD

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|Future Plan, an Ascensus Company

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Found it myself, but get an ERISA attorney involved, and file for a determination letter if you do want to go this route.

Premise: 1.411(a)-11; for participants whose benefits are NOT immediately distributable, upon Plan Termination, in the absence of participant consent (albeit because none is being sought-after), and provided that a commercial provider annuity option will not be offered; "...the participant's accrued benefit may be transferred without the participant's consent to the other plan if the participant does not consent to an immediate distribution from the terminating plan."

This is an abrogated form of the involuntary cash-out provision allowing terminating dc plans to exceed the $5k threshold, or for db plans to transfer the benefit to the PBGC.  It was an attorney led effort and recieved explicit determination from the IRS, so I would use only if you absolutely wanted to keep the 403b monies under the employer's oversight.

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