Terminated 403(b) Plans

We no longer offer a TDA plan, but still have members who have accounts. Are there any changes we will need to do for that plan that we no longer offer?

If a plan is frozen, you have to maintain that plan in accordance with law on an ongoing basis, including the written plan requirement. You can, however, if you so choose, terminate the plan under the new termination rules and distribute the benefits under the plan. Under the prior rule, termination of a plan was not a triggering event for purposes of distribution from the plan. However, under these new regulations, termination of a 403(b) plan will be a triggering event and the person will be entitled to receive a distribution from the account to the extent it is allowed under the terms of the contract.

In order to terminate a plan, you must distribute all assets to participants. The final regulations make it clear that a distribution of an annuity contract is sufficient. No distribution from the annuity contract is required. It is not so clear about distribution of custodial accounts and further IRS guidance is expected.

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