terminating 403(b) Plan

[k man]

i dont know alot about 403(b)'s but i remember doing some research and seeing that you really can't terminate a 403(b) plan. does anyone know whether you can terminate a 403(b) and if so the methodolgy? this particular plan has both employer contributions and deferrals.

[mbozek]

There is no formal termination since there is no trust which holds plan assets. If the plan is subject to ERISA the employer must file a final 5500, distribute a SMM, a 204(h) notice and have the board approve a plan amendment terminating the contributions. If the plan is funded by custodial accounts the employer needs to transfer the assets to an annuity contract since a rollover is not permitted upon the termination of the plan or the employee could transfer the funds to another custodian who will hold the assets under the rules for 403(b)(7) accounts. Amounts held in an annuity contract will be distributed in accordance with the terms of the contract.

[k man]

Why would they be required to distribute a 204(h) notice? there are no mandatory contributions. there would be no need for an amendment unless the contribution was mandatory. i think it is a discretionary contribution.

[k man]

Ok. I really am confused about how one gets out of this. the plan is a 403(b) with employer money. the accounts are cutodial mutual fund accounts. can you confirm whether the plan can be terminated and whether the participants can take distributions of their entire accounts or just the employer accounts. also, whether or not the employer can file a final 5500 at some point.