transfer from one 403b plan of employer to another of same employer

[Belgarath]

Employer has two 403(b) plans. Don't ask me why, I don't know.

Some participants want to change their investments, and transfer the funds from one plan to another. The "other" plan apparently offers different investments.

The regs under 1.403(b)-10 generally permit this, but I have a question on one item in the reg. If you look at the section I underlined, I'm concerened that if the investment in the transferor plan, let's say an annuity with TIAA, has a surrender charge, then the accumulated benefit immediately after the transfer won't be at least equal. If read literally, this would prevent ever transferring any investment with a surrender charge, which seems crazy. Any thoughts on this?

(3) Requirements for plan-to-plan transfers —(i) In general. A plan-to-plan transfer under paragraph (b)(1) of this section from a section 403(b) plan to another section 403(b) plan is permitted if each of the following conditions are met—

(A) In the case of a transfer for a participant, the participant is an employee or former employee of the employer (or the business of the employer) for the receiving plan.

(B) In the case of a transfer for a beneficiary of a deceased participant, the participant was an employee or former employee of the employer (or business of the employer) for the receiving plan.

© The transferor plan provides for transfers.

(D) The receiving plan provides for the receipt of transfers.

(E) The participant or beneficiary whose assets are being transferred has an accumulated benefit immediately after the transfer that is at least equal to the accumulated benefit of that participant or beneficiary immediately before the transfer.

(F) The receiving plan provides that, to the extent any amount transferred is subject to any distribution restrictions under § 1.403(b)-6, the receiving plan imposes restrictions on distributions to the participant or beneficiary whose assets are being transferred that are not less stringent than those imposed on the transferor plan.

(G) If a plan-to-plan transfer does not constitute a complete transfer of the participant's or beneficiary's interest in the section 403(b) plan, the transferee plan treats the amount transferred as a continuation of a pro rata portion of the participant's or beneficiary's interest in the section 403(b) plan (for example, a pro rata portion of the participant's or beneficiary's interest in any after-tax employee contributions).

(ii) Accumulated benefit. The condition in paragraph (b)(3)(i)(D) of this section is satisfied if the transfer would satisfy section 414(l)(1).