Plan Take Over

[Guest tthurston]

I am working with a 403(b)(1) plan where there was a 7 year surrender charge for participant accumulations. Can the forfeiture account be used to make participants whole after the money has been transferred as part of the re-allocation process?

[Guest mjb]

yes but it will be an employer contribution subject to non discrimination and 415 limits.

[GBurns]

Who imposed the surrender charge and Who paid it? Where is this money being "transferred" from and by Whom?

If the surrender charge was imposed under either an annuity contract or a custodial account, shouldn't the surrender charge have been imposed by either the insurance company or the mutual fund etc against the individual accounts as an administrative charge by the insurance company or mutual fund? If so how come you have this money to re-allocate?

[Guest tthurston]

Who imposed the surrender charge and Who paid it? Where is this money being "transferred" from and by Whom?

If the surrender charge was imposed under either an annuity contract or a custodial account, shouldn't the surrender charge have been imposed by either the insurance company or the mutual fund etc against the individual accounts as an administrative charge by the insurance company or mutual fund? If so how come you have this money to re-allocate?

I should have been more clear. The surrender charges will be imposed by the current provider (an annuity company). However, there are forfeiture dollars that are available in the plan and our idea is to use those dollars to make-up for the surrender charges.

Tim

[E as in ERISA]

Note mjb's comments about the "contributions" potentially being allocated on a discriminatory basis. So be careful about what the plan currently says as to how those forfeitures will used. How they will be allocated.