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Opportunity to Lower Your Risk Profile by Terminating the 403(b) Plan

March 31, 2011, Barbara Uberti Manerchia

A 403(b) plan is a qualified retirement plan that works much like a 401(k) plan. Where 401(k) plans generally are sponsored by for-profit employers, 403(b) plans can be sponsored only by certain tax-exempt employers and public schools. Employers who sponsor 403(b) plans have faced escalating compliance obligations over recent years, with plan documentation requirements, enhanced Form 5500 reporting and greater scrutiny by the Internal Revenue Service. In past years, employers were blocked from terminating 403(b) plans because the assets could not be readily distributed. The IRS recently issued guidance that provides a roadmap for plan termination, which may be attractive to tax-exempt employers and other sponsors of 403(b) plans.

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