Merging two 403(b) Plans of same employer

[Trekker]

Employer desires to merge two 403(b) plans and transfer all assets from one to the other. After the transfer, there will be no assets in the transferring plan. Must this plan continue to be maintained, languishing in the file with no activity?

How do you actually get it to go away?

Thanks for any thoughts.

[QDROphile]

If you had two 401(k) plans I would suggest you look at the nonsurviving plan as continuing, as amended, in the merged plan, rather than as an empty shell. You would still file a final Form 5500. Thereafter, you mostly forget about it. To the extent that you can see any of the plan in the merged plan, it is expressed in the terms of the merged plan, without separate effect as a separate plan.

I have not thought through any differences with 403(b) plans. You correctly observe that the transaction would be a merger/transfer rather than involving distributions and rollovers.

[Carol V. Calhoun]

I think you can treat it as having gone away, under either of two theories. One is that the merged plan is the continuation of both merging plans. The other is that a plan that has no more assets or liabilities can be treated as no longer existing.

The issue we've had with 403(b)s is that it can be difficult to figure out whether they have distributed all of their assets, particularly if the insurer is unwilling to break up the group annuity contract to issue individual annuities. But I don't think the IRS or DOL has any issue with a plan no longer being maintained once it has demonstrably ceased to have assets, as in your situation.

[Belgarath]

Taking this a step further - if you have a non-ERISA deferral only 403(b) plan, and an ERISA 403(b) plan (employer nonelective contributions only, NOT matching anything based upon the employee deferrals to the non-ERISA plan) of the same employer, does this alter anything where the employer wants to merge the non-ERISA plan into the ERISA plan? I don't think so - seems like the same asset transfer issues still exist. I presume the employer would not be able to require the participants to surrender their individual annuity contracts under the non-ERISA plan, but would have to require that they be "re-registered" under the ERISA plan?

These types of situations seem to be driven more by what is good for the investment broker than what is good for the employer and the participants, but that's perhaps an unworthy observation.

[Trekker]

Thanks all for the good information. It turns out that the facts were a bit different than we were first told. This was a change in document providers and investment platform. An education experience for me.