403(b) Plan

[Rai401k]

We are a TPA taking over a 403(b) plan and have some questions.

1. The current 403(b) is not a group contract but instead based on individual are participants allowed to transfer their money to us as even though the plan is not terminating. There is not a distributable event but I have heard that under 403(b) regulations participants can still transfer to a new provider...is this true?

2. If the client decides they want to terminate the 403(b) and start a 401(k) plan with us, is there any wait to do that? (i.e. 12 month rule?). What if they terminate their current 403(b) and start a new 403(b) with us is there a 12month wait for that?

3. What are the document requirements, our understanding is if the plan has employer contributions they are required to have a written document but if they only have deferrals no document is required?

4. Finally 5500 requirements, is it true that all 403(b) plans are now required to file the entire form - (asset information etc). if for any reason the participants are unable to move their money from the current custodian (+ we are unable to have terminated participant move their money over) will we need to have the old custodian provide us with asset statements every year to record keep and file the 5500 form?

[Guest Matthew Gouaux]

1 and 2. Individual annuity contracts present a number of issues for employers that sponsor 403(b) plans because the employer is not a party to the contract and therefore may not have any authority to terminate the annuity contracts. This may prevent the employer from terminating the plan (because the employer cannot compel the annuity contract provider to distribute the assets and a plan is not considered terminated until all plan assets are distributed).

3. All 403(b) plans are required to have a written plan document.

4. A Form 5500 is required for any plan subject to ERISA. As for what must be reported on Form 5500, you should take a look at Field Assistance Bulletin (FAB) 2009-02 and FAB 2010-01 (available at: http://www.dol.gov/ebsa/regs/fab2009-2.html and http://www.dol.gov/ebsa/regs/fab2010-1.html).