Investment switch

[Santo Gold]

For an ERISA 403b plan, participants and the employer are currently contributing money into annuities via 2 separate large annuity & insurnance companies. The plan sponsor/plan administrator would like to change that and only have the new money go into 1 annuity provider's product for, among other reasons, making it easier to track.

Can they make this change prospectively for new contributions?

Can they force participant's to move their existing account balances out of the one insurance company's product and into another insurnance company's product?

Thanks

[J Simmons]

For an ERISA 403b plan, participants and the employer are currently contributing money into annuities via 2 separate large annuity & insurnance companies. The plan sponsor/plan administrator would like to change that and only have the new money go into 1 annuity provider's product for, among other reasons, making it easier to track.

Can they make this change prospectively for new contributions?

Yes, but in so limiting the investment options, they might bear greater potential liability for investment underperformance vis-a-vis the other, eliminated company, than the employer currently might bear.

Can they force participant's to move their existing account balances out of the one insurance company's product and into another insurnance company's product?

Only if the existing contracts with the annuity/insurance companies give the employer that right. If it does, there could be liability associated for possible underperformance after the forced move. Also, you might be forcing surrender or transfer fees, back-end loads, etc. that will be assessed against the benefits that might not apply if those investments are allowed to remain where they are longer.

[Guest mjb]

For an ERISA 403b plan, participants and the employer are currently contributing money into annuities via 2 separate large annuity & insurnance companies. The plan sponsor/plan administrator would like to change that and only have the new money go into 1 annuity provider's product for, among other reasons, making it easier to track.

Can they make this change prospectively for new contributions?

Can they force participant's to move their existing account balances out of the one insurance company's product and into another insurnance company's product?

Thanks

If the funds are vested the employer cannot force the employees to move their account balances because the employees have a vested right to receive an annuity benefit under the contract to which they contributed. Have you read the certificate of insurance that is issued to each employee to determine their rights?

John: What state insurance laws permit the employer to cancel the vested right of an employee to receive an annuity under a group contract?

[J Simmons]

John: What state insurance laws permit the employer to cancel the vested right of an employee to receive an annuity under a group contract?

Boy, you got me. My post only suggested that the employer could move, not cancel, the vested benefits, and then only if the contract rights gave that unilateral power to the employer.