401(k) into 403(b)?

[betheeg]

company currently has 401k with only employee contributions. because audit costs are out of control (around $10,000) does it make sense to go to a 403(b)? can you restate as 403(b) or will 401k have to terminate giving ee's option to roll to 403(b)? any reasons to not do this?

thanks for any help....

[mbozek]

I dont know of any reason for an 501c3 entity to adopt a 401(k) plan instead of a 403(b) annuity because of the additional costs/ reporting, etc which comes from maintaining a qual plan. The only advantage (if this is an advantage) is that employees in a k plan can invest in individual stocks and bonds. All employees can contribute 13k to a 403(b) plan since there is no ADP to limit contributions by HCEs.

Best solution is to terminate the k plan establish a 403(b) plan and allow employees to rollover the proceeds to a 403(b) plan. A 403(b) plan is not considered a successor plan under the proposed 401(k) regs. A 401(k) plan can not be restated as a 403(b) plan because a 403(b) plan is not a qualified plan.

Termination of k plan should not be difficult if only contributions are salary reduction. There may be a question of how to transfer outstanding loans in the 401(k) plan.

By the way, why does it cost 10k do an audit of sal reduction assets in a k plan?