Freezing 403b plan starting 401k plan

[Guest kbett]

At the next investment committee meeting, my boss would like to present a

solution that would include freezing a subisidairy's current 403(b) plan for current

enrollees and starting a 401(k) plan for new employees / enrollees;

allowing a voluntary migration from the (b) to the (k) as individually

desired. This all assumes that there are no major pitfalls along the way.

What pitfalls could we potentially encounter?

[TLGeer]

Why not keep the 403(b) in place? I just spent the better part of two days helping an employer recover from the same decision.

By choosing 401(k), the employer volunteers for a bunch of limits and rules that don't apply under 403(b) (starting with ADP and top heavy) and abandons several advantages of 403(b) (special rules under 402(g) and 415, use of full-time-equivalent year's compensation).

Is there some specific reason, or is the boss trying to shake loose of a GAC? Other than the rule limiting 403(b) to annuities and mutual funds, advantages of 401(k) are thin on the ground.

Tom Geer

[John Feldt ERPA CPC QPA]

If the 401(k) plan is over the 100 participant threshold (or eventually goes over 120 if it's currently under 100 now), then an accountant's opinion would need to be attached to the Form 5500. Currently, 403(b) plans are exempt from this.

That accountant's opinion will cost of a few thousand dollars or so.

As TLGeer asked, what extra (better) features do they think they can get by switching to a 401(k)?

[Guest kbett]

I'm curious about the client you referenced -- why did they make the switch and how did you help them recover?

[TLGeer]

I'm curious about the client you referenced -- why did they make the switch and how did you help them recover?

Please check your inbox here. I am concerned about giving client details where people might recognize them.

Tom Geer