Switching from an ERISA 403(b) to a Non-ERISA 403(b)

Q. May a plan participant switch from an ERISA 403(b) plan to a non-ERISA 403(b) plan? If so, how is this accomplished?

A. While the Department of Labor has not addressed this, there are best practices that can be followed. 

First, establish a non-ERISA 403(b) plan in which only elective deferrals are being contributed to the plan. The ERISA plan is frozen (not terminated). The toughest part is to then make plan-to-plan transfers from the ERISA plan to the non-ERISA plan until all assets are out of the ERISA plan. It is important to not terminate, since then they could not have another 403(b) plan for a year. 

In a plan-to-plan transfer, depending on whether the ERISA plan had individual contracts or a group contract, amounts might need to be signed off on by each participant separately requesting a plan-to-plan transfer (individual contracts); or if there is a group contract, the employer may be able to request a full plan-to-plan transfer to the new plan.

File a final Form 5500 for the year in which all of the assets are gone from the ERISA 403(b) plan.