Transfer from one 403(b) vendor to another

[waid10]

A hospital client contacted me with a question. Several years ago, the hospital had several 403(b) vendors on an approved list. An employee could select one of the vendors to place their 403(b) money with. The hospital was not involved in any way, other than to process the payroll deduction. Years ago, one employee requested to move their 403(b) account balance from their current vendor to another 403(b) vendor that was not on the hospitals list of approved vendors. The employee was permitted to do this (I was not involved with the client at that time). Now a broker involved with this employee has called the hospital's HR staff and asked them to approve the transfer of the 403(b) account balance to yet a different 403(b) vendor.

The multiple 403(b) vendors concept is somewhat foreign to me. My gut reaction is that the hospital doesn't have the authority to grant such a transfer. The 403(b) contract is between the vendor and the employee. The hospital isn't a party.

Any thoughts on this?

Thank you.

[ETA Consulting LLC]

My gut reaction is that the hospital doesn't have the authority to grant such a transfer. The 403(b) contract is between the vendor and the employee. The hospital isn't a party.

Any thoughts on this?

Thank you.

The hospital is merely approving the vendor to offer investments under the plan; which is perfectly okay as long as the new vendor agrees to share information to ensure the 403(b) rules are followed.

Good Luck!

[rcline46]

Sounds to me like the broker is trying to get a fresh commission. Now the hospital cannot intervene, but they can say we have enough vendors, we are not adding a vendor. Also, there needs to be 404(a)(5) disclosure of fees even in a 403(b) since it is sef directed.

If it is a broker, it is a custodial account. If we are talking about an insurance (annuity) contract, it is an insurance agent, and new contracts give very nice commissions. There are insurance regulations against twisting. You have uncovered a dirty little secret about 403(b) plans - fees are much worse than 401(k) plans and there is more room for unscrupulous players to operate. Not saying this 'broker' is one, but now a second move to an unapproved vendor? what is wrong with the approved vendors?

Just saying.

[ETA Consulting LLC]

Also, there needs to be 404(a)(5) disclosure of fees even in a 403(b) since it is sef directed.

Only to the extent the 403(b) is subject to ERISA. I'm under the impression that the employer has no involvement in the plan other than depositing employee deferrals. May want to verify ERISA status.

Good Luck!

[waid10]

It turns out that the employee doesn't want to move this to another 403(b), but rather wants to roll it into an IRA. So the employee's financial advisor wants the hospital to provide a termination letter (even though the employee hasn't and isn't terminating employment) so that the rollover can happen. This just seems strange to me. The Plan doesn't allow in-service rollovers. How could the hospital allow this? What am I missing here?

[rcline46]

Rollover to IRA = new commission. 'Broker' wants hospital to help commit fraud for personal gain?

Don't allow hospital to lie.