At Great American Plan Administrators, we know that it is important for
you to get the facts straight on the new IRS regulations and how they can change your
403(b) plan. Below you will find important information on what you need to know regarding
the new transfer and exchange rules and how to avoid any penalties to your 403(b) account.
What changed?
- The new regulations define two key terms regarding the movement of 403(b) accounts: Transfers and Exchanges.
- A transfer now represents a change in employment and the movement of a
plan from your old employer to a plan with your new employer, either with the same product
provider as under your old employer plan, or a new one.
- An exchange now represents a mere change in product provider within your current employer plan.
- As of September 25, 2007:
- You may only transfer your 403(b) monies to a new employer plan if there
is an Information Sharing Agreement in place between your new employer and the product
provider.
- You may only exchange your 403(b) account to another 403(b) product
provider if an Information Sharing Agreement is in place between your employer and the
new provider.
Why did this change?
- The purpose of the Information Sharing Agreement requirement is to
ensure that your employer and product provider will receive the necessary information to
administer your account in compliance with the new IRS regulations
What does this mean?
- A Transfer or Exchange of your 403(b) account to a product provider without
an Information Sharing Agreement in place by January 1, 2009 could cause your account to become
disqualified and subject to income taxes and IRS penalties.
How do I initiate a transfer or exchange?
- If you plan to transfer or exchange your 403(b), please submit a “403(b) Plan Other
Distribution Request Form” on our website, gaplandata.com. We will then verify that the
transaction will avoid penalties and taxation, and notify you when the transaction takes
place or if further action is required.
This Web site is not intended or written to be used as
legal or tax advice. As a taxpayer, you cannot use it
for the purpose of avoiding penalties that may be imposed
under the tax laws. You should seek advice on legal or tax
questions based on your particular circumstances from an
independent attorney or tax advisor.
*Statistics compiled from the 2004 Retirement
Confidence Survey, Employee Benefit Research
Institute; and
"Coming Up Short: The Challenge of 401(k) Plans," Alicia Munnell
and Annika Sunden
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