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403(b) Plans - ERISA to nonERISA status


Guest hnbc

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A 501© client is offering a 403(b) plan to his employees under an ERISA plan and the plan currently allows elective deferrals only. 5500's have been prepared annually for the client, but it's unknown whether or not they've been filed. Is it possible to restate, or convert, this ERISA plan into a non-ERISA arrangement where the individuals have individually sponsored TDSA's? What are the consequences to the employer and to the employee if this change occurs? Thank you for your comments and opinions.

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The only way to eliminate ERISA rights is to cease contributions to the ERISA plan and replace it with a non ERISA plan. However,the provisions of ERISA would continue to apply to amounts contributed to the annuity contracts before contributions are terminated. E.g., Employer switches to non ERISA plan on 1/1/04. Contributions made under the new plan beginning 1/1/04 would not be subject to ERISA. However, ERISA would apply to account balances attributable to comp. earned through 12/31/03. You need to retain counsel to advise you on changing to a non ERISA 403(b) and its collateral applications, such as application of state law to fiduciary issues.

mjb

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