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Question 24 – Plan-to-Plan Transfers

Q. We have a participant who works for school district ABC and has been contributing to us. He then terminates employment and starts working for school district 123. He would like to use the same annuity for SD 123 contributions to avoid a new surrender charge schedule. We are listed as an approved vendor for both plans and we can easily switch the annuity from SD ABC to SD 123. Are there any issues with doing this? Do we need to start a new annuity with new surrender charges under SD 123? I think this would be a disservice to the participant and prefer to just continue the same individual annuity contract, but with funding from SD 123.

We are willing to accept a letter from the participant stating that he no longer works for school district ABC and would like to continue the annuity with school district 123. 

A. As long as the former plan and the receiving plan both permit plan–to-plan transfers, and your company is an approved provider in the new plan, I see no impediment to actually moving the annuity contract itself in order to benefit the participant who is then NOT faced with a new surrender charge period. I believe, however, that the new plan should verify with the former employer that the participant has severed employment there, since the regulations caution us that self-certification is not permitted. If the participant has a severance letter in his/her possession, however, that should suffice as confirmation that severance did occur.

If the plans don't permit plan-to-plan transfers, then the account itself could be rolled into the plan (most often plans do accept rollovers into the plan, even when they don't permit transfers) instead of being transferred. Members should always check with their providers to be sure that the account itself can be rolled over as well as transferred.