terminate 403(b) upon severance of employement

[Guest caroline isherwood]

As you all know, termination is not a 403(B) distributing event. However, because EGTRRA provides for severance from employment, distribution becomes possible on this basis. I would like to terminate a 403b plan once all the distributions have completed but I am not certain how to do so. My resources indicate that I will have to amend the plan and perhaps have a board resolution regarding the termination but I am not certain of the specifics. Does anyone have any idea?

Thank you in advance for your input and suggestions.

Caroline

[mbozek]

There is no procedure for terminating a 403b annuity plan because the plan has no assets to distribute. I dont know what you mean by distributions since the funds are held either in a custodial account or an annuity contract both of which are established in the name of the employee. Thus there is nothing to transfer to the employee. The annuity contracts/certificates are in the possession of the employee. I dont know if a custodian holding 403(B) mutual funds will distribute the assets to the employee. My understanding is that the custodial account will continue to hold the assets for the employee after the plan terminates. Check the custodial account agreement.

Termination is more a procedure to cease employer contributions than to transfer assets. I am curious how forfeitures will be applied when a 403(B) plan terminates since there is no requirement that the participants be 100% vested upon termination. The only action required should be a resolution terminating the plan and a resolution stating what will become of forfeitures or provide for 100% vesting in all accounts.

[Guest caroline isherwood]

Thank you for your input, mjb. With regards to forfeitures, there is no such issue in my situation because the plan doc provide for 100% vesting and nonforfeitable at all times.