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Tip of the Week: Exchanges

Editor’s Note: This is an occasional feature in the NTSA Advisor. It is drawn from The Source, a book that covers technical, compliance, administrative and marketing aspects of the 403(b) and 457(b) markets. More information about The Source is available here.

Following is a discussion of exchanges of funds in 403(b) accounts.

An exchange under the final 403(b) regulations is simply the movement of all or some portion of a 403(b) account held with one vendor to another vendor that is a part of the employer’s plan.

The recipient vendor MUST be a part of the plan, either because the vendor is receiving contributions under the plan (thus is required under the written plan to share information necessary for compliance), or has entered into an Information Sharing Agreement with the employer. In both cases, the recipient vendor must be listed as an approved provider in the written plan.

Thus, after Sept. 24, 2007, what used to be called a transfer or a 90-24 transfer is now called an exchange or a contract exchange. It is very important to note this change in terminology.