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John, Employment Lawyer
Category: Employment Law
Satisfied Customers: 5687
Experience:  Exclusively practice labor and employment law.
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Can an employer terminate one 403 B plan and subscribe to another

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Can an employer terminate one 403 B plan and subscribe to another for the company AND force an employee to switch all their current assets to the new fund
Hi, My name is XXXXX XXXXX I’m happy to assist you with your question today.

Yes under the Employee Retirement Income Security Act (ERISA), retirement plans can be terminated and contributing employees required to reinvest into , but the the new plan must provide the employee equal or greater vesting and benefits than the old plan. If this is not the case in your matter (i.e., you are losing vesting or benefits in the new plan), I'd suggest you file a charge with the Department of Labor - Employee Benefits Security Administration (EBSA). EBSA will investigate the matter and try to work out a solution with the employer. If a solution cannot be met, then the Department will possibly sue the employer for ERISA violations. If this is something that interests you, I'd suggest you file a charge with EBSA here.

I believe this answers your question. However, if you need clarification or have follow-up questions regarding this matter, I will be happy to continue our conversation – simply reply to this answer. If you are otherwise satisfied with my response, please leave a positive rating as it is the only way I am able to get credit for my answers. Thank you, XXXXX XXXXX wish you all the best with this matter.

Customer: replied 3 years ago.

just to clarify, when you say yes plans can be terminated and contributing employees required to reinvest into, what do you mean by "into".....into the new retirement plan the employer has chosen?

The employer "owns" the annuity but the I "own" the individual account ...just clarifying

There are two types of contributions that are involved. First, non-elective employer contributions - these are contributions by the employer, that are made to the account - these can be matching, discretionary bonus payments or mandatory. If you haven't yet "vested" these, (meaning you haven't had enough time in the plan), the employer must transfer to the new plan an equal amount of cash and equal remaining time to vest these funds. For example, if you have two years remaining to vest on a $1000 employer contribution, then you must be provided an equal or greater benefit in the new employer plan - i.e., no more than 2 years and no less than $1000 in the new plan.

On the other hand, you are always vested in your elective contributions. On a plan termination you can take these contributions and/or roll them over into any other type of tax qualified account, including the new 403b plan sponsor your employer has chosen, or an individual IRA. The key is that you must be sure that the roll over is tax qualified. If you don't do that, you can suffer an early withdrawal penalty.
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