403(b) rollover to a 401(k) ... OK?

[Guest Moe Howard2]

It's my understanding that there are two kinds of 403(b). The kind established & maintained by employer (this kind is an ERISA plan) .... and the kind not established/ maintained by employer (not an ERISA plan).

I'm not sure which of the two types I am dealing with (because I have not yet gathered all the info from employer to enable me to determine if they are ERISA 403(b) or personal 403(b) of employees.

Nevertheless, contribututions are made to these 403(b) through elective deferrals.

The employer and employees want to switch to a 401(k) plan.

The only assets of the 403(b) are mutual funds. No annuity contracts.

My questions:

1) If the 403(b) is an ERISA plan, can it be merged into the new 401(k) ?

2) If the 403(b) is not an ERISA plan, can each employee participant roll his 403(b) assets into the new 401(k)?

[Guest mikewebb68]

1) No. EGTRRA permitted the individual rollover of 401(k) plan account balances to 403(b) plans and vice versa, but there was nothing in EGTRRA that would permit a merger of the type you described. If the employer in question established and ERISA plan, it would be "stuck" with the inactive 403(b) plan, since, unlike a 401(k), plan termination is not a triggering event for a 403(b) plan which would permit distirbutions. Thus, the employer would essentially have doubled its administrative work, maintaining both the inactive 403(b) and active 401(k). Hopefully, the upcoming 403(b) regulations will provide some relief in this regard, but at present, this is a dilemna for employers maintaining an ERISA 403(b) who wish to establish a 401(k) plan.

2) No, unless the employee has incurred a triggering event (e.g., termination of employment. Remember, plan termination is NOT a triggering event for 403(b). The answer is the same whether the arrangement is subject to ERISA or not.