403(b) Outlook: Confirm Your Approved Providers
November 09, 2007
According to the final 403(b) regulations, beginning on or after Sept. 25, 2007, Revenue Ruling 90-24 has been repealed.
The regulations further provide that transfers from a 403((b) contract issued by a provider approved under the plan to an unapproved provider’s 403(b) contract are not permitted unless the unapproved 403(b) provider enters into an information sharing agreement (sample language is attached) with the 403(b) plan sponsor by Jan. 1, 2009.
What Plan Administrators Need To Do
- Review your current list of approved vendors.
If you only want to allow transfers to your current approved providers, you simply need to complete the 403(b) Approved Provider List (PDF) verifying your approved provider list and fax it to 800 842-5916. This will enable us to process 403(b) transfers for your plan participants in compliance with the regulations.
An information sharing agreement is not required for approved providers under your 403(b) plan. If you make any changes to the approved provider list, you should contact us immediately so that we can limit transfers appropriately.
- If you are going to permit plan participants to transfer their 403(b) accumulations to unapproved providers, you will need to indicate the names of these providers on the 403(b) Information Sharing and Contract Exchange Agreement (PDF) and fax it to 800 842-5916.
If we do not receive this list from you, we will not process 403(b) transfers to any unapproved provider for your plan participants. To avoid any potential processing delays or participant complaints, we ask that you provide your completed list as soon as possible.
In late 2008, you will receive a letter from TIAA-CREF requesting you to verify that you have entered into information sharing agreement(s) with the unapproved providers that you previously indicated were authorized to receive transfers.
If you do not enter into an information sharing agreement with an unapproved provider indicated on your list and we have processed a transfer to the unapproved provider between Sept. 25, 2007 and Jan. 1, 2009, TIAA-CREF will contact the participant to let them know that they may need to redirect the transfer to an approved provider under your plan.
If they do not take the appropriate action, it is possible that the participant’s contract will become disqualified and the accumulation in the unapproved contract will be fully taxable to the participant.
Under current IRS guidance, the tax consequences of such a transfer are uncertain. We are awaiting further guidance on this issue from the IRS and Treasury.
As you know, TIAA-CREF is unable to provide legal or tax advice and you are advised to further discuss with your legal counsel or advisor.