403(b)wise Beginner's Guide403(b) FAQsWise Moves  
Wise Moves
     
 
 
YOU HAVE FOUND OUR OLD WEB SITE. BE SURE TO CHECK OUT OUR NEW AND IMPROVED SITE!
 
 
How to Transfer 403(b) Money (Via a 90-24 Transfer)
 
  Note: New 403(b) regulations, set to go into effect January 1, 2009, will impose more restrictions on the transfer of 403(b) money. "Old style" 90-24 transfers to outside-of plan-vendors, as described below, will be permitted until September 24, 2007. For the latest news on transfers see New 403(b) Transfer Rules.
 
Unhappy with your current 403(b) provider? Fed up with your employer's vendor list? The IRS allows you to perform something called a 90-24 transfer into the vendor of your choice. The caveat is that your employer's plan and your existing vendor must permit transfers. The IRS allows transfers, but does not require them to be made. You may experience some reluctance on the part of your existing provider to part with the funds. If they simply refuse to make the transfer, there is little that can be done. If they do permit transfers, however, you can move existing 403(b) money into quality low-fee companies like Fidelity, Charles Schwab, TIAA-CREF, T. Rowe Price, and Vanguard to name a few, even if they are not on your employer's approved vendor list. There are two more significant points to keep in mind.
 
  1. The IRS allows outside-of-plan 90-24 transfers (as of this writing) but does not require that they be made. This means that an employer or a vendor can restrict this type of tranfer. Before attempting to initiate an outside-of-plan transfer check with your employer to see if it is allowed.
 
  2. Many 403(b) vendors — particularly insurance companies — charge stiff exit penalties, which typically last from 5 to 15 years with the charge corresponding to the number of years the penalty lasts. For example, if a vendor imposes a surrender charge for 7 years, then the exit penalty will often be 7 percent of balance. These charges usually decline by one percent each year. Unfortunately, many vendors impose rolling surrender charges. This means each new contribution is locked into a new surrender charge period. Participants saddled with these charges have two choices: (a) bite the bullet, pay the penalty, and move the money; or (b) transfer only money that has passed the penalty threshold. As new money passes the penalty phase, transfer it. Be aware of all surrender charges before initiating any type of transfer.
 
  3. Your current and future financial institution will require various paperwork in order to perform a transfer. Contact each to find out exactly what is needed. The financial company you wish to transfer to should be a good source of information during this process. We also encourage you to post transfer questions on our Discussion Board.
 
  4. If you have made up your mind to transfer 403(b) money to a new vendor, cease contributing to your current vendor and direct this money to your new — and hopefully improved — vendor. This gets your money working right away with your new vendor, and also prevents contributions from being subject to new surrender charges with the former vendor.
 
  5. A 90-24 transfer is a trustee-to-trustee transfer. To avoid penalty you must NEVER take possession of the funds. Instead, all exchange of money must be handled by the trustees holding and receiving the money.
 
  Transfering 403(b) money can be daunting but possible. See Transferring Out of a High Fee 403(b). The desire to transfer 403(b) money is a symptom of a larger problem: bad vendor choices for participants. Employees who band together, educate one another, and press their employer stand the best chance of getting quality investment choices. See Get Better 403(b) Choices. We encourage you to use the information on this site to help you garner better investment choices. Good luck. Stay strong, and remember: the longest journey starts with one step.
 
 

Home | Disclaimer | © 2001-2007 bWise Guys, LLC. All rights reserved.

home
contact us
news archive
about us
Related Information

IRS Revenue Rule 90-24 Wording