You may have heard that final Code section 403(b) regulations, recently released with an effective date of January 1, 2009, contain new rules regarding transfers between 403(b) plans or among plan providers under your plan.

Transfers will still be allowed, but there are some new rules that have an early effective date. Effective for transfers occurring after September 24, 2007, your employees may transfer their 403(b) funds only to those companies with which you as the employer have an “Information Sharing Agreement” in place. Further clarification on this point is currently being sought from the IRS.

Why the change?

The IRS has used a Revenue Ruling issued in 1990, Revenue Ruling 90-24, to control how transfers between 403(b) plans can be made. Often referred to as “90-24 Transfers,” these transactions are different from rollovers because they are not considered distributions. Since they are not considered distributions, no tax reporting is necessary and the restrictions on the distribution of salary-reduced contributions do not apply.

Currently, under Revenue Ruling 90-24 participants can transfer to any company offering 403(b) plans. There is no requirement that the company to which the transfer is made be “approved” by the employer. In fact, 90-24 Transfers are often made to providers with which an employer has no 403(b) plan-provider relationship. Therein lies the problem — from the IRS’s perspective.

What are the new rules?

Under the final 403(b) regulations, employers may permit transfers from one company offering 403(b) accounts to another company offering 403(b) accounts (both made available by the employer) under certain conditions. The company receiving the transferred amount must enter into an agreement with you as the employer (or your representative) to exchange information necessary for compliance with the new 403(b) regulations. This agreement to share information must be in place by January 1, 2009, but will be applicable to any transfer occurring after September 24, 2007.

In addition, to the extent provided in each plan, plan transfers will be permitted between an employee’s current and former employers’ 403(b) retirement plan providers.

What does this mean for employers?

• Employers may be required to enter into an Information Sharing Agreement for transfers among your plan providers occurring after September 24, 2007. 
• Review the “90-24” provisions in your 403(b)(9) Retirement Plan Adoption Agreement to determine whether your organization wishes to make a change to those provisions. If you have multiple vendors on site already, your Adoption Agreement may already have a provision to allow movement to and from these vendors. On the other hand, your Adoption Agreement may allow transfers to any vendor, and that provision will have to be changed before January 1, 2009.
• Contact your GuideStone representative to discuss changing your Adoption Agreement.
• Communicate changes to your employees.
• Review information provided by the IRS.

Our Implementation and Client Support department can provide you with assistance in reviewing your plan.

The new regulations raise significant questions. Industry groups are currently pressing the IRS for changes and clarifications to certain provisions within these new regulations. Some of the dates mentioned above could be adjusted as a result. Our Web site has up-to-date information on these changes and any last-minute adjustments. GuideStone is committed to providing you current, accurate information. Please feel free to contact your GuideStone retirement plan relationship manager concerning these changes and their impact on your GuideStone retirement plan.