How to terminate or freeze a 403(b) plan being replaced by a 401(k) pl

[Guest patom]

We have a 401(k) plan & a 403(B) plan. Going forward, we would just like to offer the 401(k) plan. With respect to eliminating the 403(B) plan, what are our options? Should we freeze it? Could we terminate it & pay out all individuals? Is ther new legislation that would allow participants to move their 403(B) dollars into their 401(k) accounts?

[Carol V. Calhoun]

The tax bills in 1999 and 2000 would have permitted 403(B) money to be transferred to a 401(k) account. The legislation was not considered controversial, but failed to be enacted only because it was attached to tax bills which never managed to get both passed by Congress and signed by the President. However, the provision will most likely be included in some legislation this year.

403(B) money is supposed to be held in annuity contracts or custodial accounts owned by the employee. Thus, absent (a) the passage of the legislation referenced above, and (B) an employee's election to move money from the 403(B) to a 401(k), the employer typically has no way to force a transfer.

[david rigby]

I am under the impression that there is no technical authority for terminating a 403(B) plan. Is that correct?

[Carol V. Calhoun]

You are correct. Because the contracts are owned by employees, an employer is not in a position to shut down the trust fund, as could be done for a 401(a) plan.

[PMC]

Couldn't there be a possibility that the 403(B) may be an "employer spnosored plan" and is funded via a group annuity contract with the employer as the contractowner and the employer decides to terminate the contract and make distributions to participants? Or doesn't it matter that it is an employer plan - can't distribute 403(B) elective deferrals in this event?