401k Plan under same Insurance Contract as 403b

[austin3515]

Am I correct that a 401(k) Plan and a 403(b) plan cannot be invested under the same insurance contract? I have one issue in particular which is that the 401(k) Plan has a trustee? Combining all the assets in one investment contract and recordkeeping the source separately would not be sufficient, correct?

[Peter Gulia]

I'm aware of a non-precedent authority that could, with the right contract terms (including separate accounting) and other facts and circumstances, be argued to support a position that using one group annuity contract as the funding means for an employer's 403(b) plan and the same employer's 401(a) plan is not necessarily an Internal Revenue Code violation. Read IRS Letter Ruling 9422053.

Please understand that I don't suggest using an annuity contract as a retirement plan's primary preretirement investment. And among many other decisions, each plan's fiduciary must find that the arrangement does not improperly subsidize another plan or otherwise breach ERISA's or State law's exclusive-purpose duty. But if the plans' fiduciaries already made those decisions, using one annuity contract might be possible.

[austin3515]

Where could I get a copy of that letter ruling?

[austin3515]

§1.403(b)-8 Funding.

(f) Combining assets. To the extent permitted by the Commissioner in revenue rulings, notices, or other guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)(b) of this chapter), trust assets held under a custodial account and trust assets held under a retirement income account, as described in §1.403(b)-9(a)(6), may be invested in a group trust with trust assets held under a qualified plan or individual retirement plan. For this purpose, a trust includes a custodial account that is treated as a trust under section 401(f).

Anyone have any thoughts on this? My situation relates to insurance contracts. Why not mention insurance contracts here?

[Everett Moreland]

As to "Why not mention insurance contracts here? see:

http://www.annuity-insurers.org/pdfs/4.11.11.attach.pdf

http://www.annuity-insurers.org/pdfs/4.16.12.attach.pdf

http://www.annuity-insurers.org/pdfs/5.1.12.attach.pdf

[austin3515]

Would you mind explaining how these documents either support or refute my conclusions? It seems to me that the first two articles appear to deal with investment vehicles that might be offered to both 403b and 401a plans, but honestly it's very difficult to decipher.

[austin3515]

Believe it or not, the insurance company had submitted this arrangement to the IRS and request (and received) a favorable PLR.