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403b Protections

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Could you please tell me, what protections exist for 403b? Are they any state or federal laws or agencies (like the FDIC) that protect a 403b from a plan provider going bankrupt? I am mostly interested in the any protections that pertain to Florida residents.

 

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I don't see how a plan provider going bankrupt would be a concern because usually the underlying investments

like mutual funds are not owned by them. I would look to investments linked with major fund families when investing through an intermediary.

 

Don't know what I'm talking about possibly. Its just my thoughts.

 

 

 

Tony

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Could you please tell me, what protections exist for 403b? Are they any state or federal laws or agencies (like the FDIC) that protect a 403b from a plan provider going bankrupt? I am mostly interested in the any protections that pertain to Florida residents.

 

Tony's right that mutual funds have a hard time going bankrupt. At the least, we need more facts. Is the plan subject to ERISA? Are the investments mutual funds or annuities? Are we talking about the investment provider going bankrupt or the administrator? Are there church organizations involved, and if so is there a retirement income account involved?

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It might be protected under the SIPC if you go through a brokerage but don't count on that insurance for anything if your brokerage goes belly up!

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Could you please tell me, what protections exist for 403b? Are they any state or federal laws or agencies (like the FDIC) that protect a 403b from a plan provider going bankrupt? I am mostly interested in the any protections that pertain to Florida residents.

 

 

While there is no risk of insolvency in mutual fund investments because the fund assets owned by investors are seperate held from the investment company, there is credit risk in a fixed annuity contract issued by an insurance company which becomes insolvent and is taken over in rehabilitation by a state insurance department. In 1993 Mutual Benefit Life insurance company became insolvent and was taken over by the NJ insurance department because of poorly performing RE investments. For several years no withdrawals were permitted from any annuity contracts including 403b contracts except for death. The interest rate was reducted to about 5%. Finally the real estate assets held by Mutual Benefit were sold and the annuity owners were allowed to cashout their investments in the annuities around 2005. The remaining annuity contracts were sold to Sun Life.

 

If the insurance company is unable to pay all of its liabilities the state insurance department could require that other insurance companies contribute to a guarantee fund to reimburse policy holders for their losses. The amount recoverable varies with each state.

 

Variable annuities are not subject to claims of creditors of the insurance company because VA accounts are separate from the assets of the insurance company and are not subject to the claims of the insurance company's creditors.

 

Amounts held in a church 403b plans are subject to state laws governing creditors claims.

 

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Could you please tell me, what protections exist for 403b? Are they any state or federal laws or agencies (like the FDIC) that protect a 403b from a plan provider going bankrupt? I am mostly interested in the any protections that pertain to Florida residents.

 

 

 

Did some digging of my own...

 

The 403b (an "unallocated annuity") is protected in some states (see: http://www.nolhga.com/factsandfigures/main...detail/docid/1) by state members of this organization http://www.nolhga.com/home.cfm. The specific state charged with the consumer protection is dependent on the state the resident the policy/asset holder resides in at the time of the insurer's insolvency/bankruptcy. However, in most cases, where a 403b is protected, only up to $5 million is insured when the holder is an employer - regardless of the number of employees. Of course, these rules only apply to insurers or investment companies owned or backed by insurers. However, if the subsidiary that offers a 403b goes bust your funds may not protected. These fact apply regardless of whether or not the funds are in a fixed "guaranteed" account or a mutual fund.

 

Adam

 

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Could you please tell me, what protections exist for 403b? Are they any state or federal laws or agencies (like the FDIC) that protect a 403b from a plan provider going bankrupt? I am mostly interested in the any protections that pertain to Florida residents.

 

 

 

Did some digging of my own...

 

The 403b (an "unallocated annuity") is protected in some states (see: http://www.nolhga.com/factsandfigures/main...detail/docid/1) by state members of this organization http://www.nolhga.com/home.cfm. The specific state charged with the consumer protection is dependent on the state the resident the policy/asset holder resides in at the time of the insurer's insolvency/bankruptcy. However, in most cases, where a 403b is protected, only up to $5 million is insured when the holder is an employer - regardless of the number of employees. Of course, these rules only apply to insurers or investment companies owned or backed by insurers. However, if the subsidiary that offers a 403b goes bust your funds may not protected. These fact apply regardless of whether or not the funds are in a fixed "guaranteed" account or a mutual fund.

 

Adam

 

 

I dont understand your post. Amounts held in mutual funds are not subject to state insurance guarantee laws because MF are not insurance companies.

 

Also protections are different if the annuity policies are issued to individual employees instead of the employer. Finally the guarantee only applies to fixed annuities not variable annuities.

 

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