403(b) plans and separately managed accounts

[Guest dkasprzak]

Is it possible or has there been VERY RECENT legislation stating that 403(b)plan participants can now have access to separately managed accounts or individual brokerage accounts?

[Dowist]

I haven't heard of this legislation - it would be a major change because the rules are oriented towards insurance and mutual funds (the only allowable investment vehicles now).

[jlf]

A pre-1989 403(B)1 balance may be rolled over to a self-directed IRA at the discretion of the employee; while a post- 1988 balance is an "eligible rollover distribution" only AFTER the employee satisfies an early distribution triggering event under 403(b)11. SEE FRANK V. AARONSON, COURT OF APPEALS FOR THE 2ND CIRCUIT, 96-9456.

If you feel the Court's decision makes little sense, as many practitioners do, may I urge you to write to Chairman Bill Archer of the House Committee on Ways and Means.

Under current law, cash flow may only be invested in annuities (403(B)1) or mutual funds (403)(B)7).

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[This message has been edited by jlf (edited 07-09-99).]

[Ellie Lowder]

Or, 403(B)(9) income accounts for religious organizations, where investment options are not limited to 403)(B)(1) annuities/403(B)(7) custodial accounts. I have reviewed a great many pending pension bills, and don't see anything in those which would change the restrictions for 403(B) options.

Incidentally, employer contributions (non-salary reduction) to annuities have no withdrawal restrictions - so, could be rolled over to an IRA without a qualifying event (provided plan permits it).

[jlf]

Ellie,

What are the investment options for 403(B)9 income accounts?

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