403B conversions to 401K Plan

[Guest BYenk]

If a 501©(3) starts a 401K plan, and leaves its 403B ERISA assets where they are because of back-end surrender charges, will they have to do separate 5500's?

[Carol V. Calhoun]

It's not clear to what extent you might be able to stop the Form 5500 filings on the theory that the 403(B) plan had been terminated, at least if you converted the 403(B) plan to individual annuity contracts. This topic has been discussed before on this board; you can click here to see the older discussions.

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Employee benefits legal resource site

[IRC401]

Why would you want to start a 401(k) plan and subject the plan to the ADP test?

There is no requirement that 403(B) assets be invested in insurance contracts with undesirable charges.

[Guest BYenk]

When the 403B Erisa program was started at this company, the in thing was to use indiv annuities. Because of the back end charges, they cannot be roled into the 401K, not o mention the difference in the way they were taxes. I think that the IRS says that unless the employees are terminated, they cannot be converted to indiv IRA rollover accounts. As such, the 403B (i.e., the annuites) must remain as is, with the owner being the non-profit organization.

This organization has only one highly compensated person, so is it a big deal that they will now be subject to the ADP test?

And, do they have to do two separate 5500's, one for the 401K and one for the 403B. Remember they will no longer be funding the 403B.