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If a teacher is still employed with their district and has a 403B with high fees can they create a self employed 401k and have the funds transferred?

Likewise, if they worked for their district and also part time for another employer that offered a 401K could they transfer the funds from the 403b to the 401k?

I'm looking for a way a teacher can get out of their district plan without penalties or waiting to turn 59 years old.

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Chris

I'm probably of no help with this  but maybe you should investigate this topic on investopedia or the IRS website for details. As you know these things can get complicated and none of us know the current facts completely and exactly. Plus this is an unusual question we don't usually get. I'm sure you would want to investigate this yourself instead of relying on a forum. 

Still see if this helps any:

https://www.investopedia.com/ask/answers/roll-into-403b.asp

The IRS says that you can roll a 403(b) plan into a 401(k) plan if you now work for an employer that offers a 401(k). You can also roll a 403(b) plan into a solo or independent 401(k) plan if you are self-employed.

However, if you work for an employer that does not offer a 401(k) plan, then you cannot roll a 403(b) plan into any type of 401(k) plan. If your employer offers a SEP plan or 457 plan, then you can roll a 403(b) plan into one of those.

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42 minutes ago, ChrisC said:

I'm looking for a way a teacher can get out of their district plan without penalties or waiting to turn 59 years old.

Do you have other 403b choices besides the one you want to escape?  Do you have a 457b state plan?   If you are in an annuity, I believe transferring it to something different won't stop the insurance company from still socking you with surrender fees.Have you considered an IRA as an option, Saving in taxable accounts?

 

Please supply more in-depth information on your situation. I think i remember you posting before but don't remember your post's content

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My wife has a plan that she can no longer contribute to because the district dropped it. No annuity, just an S&P index mutual fund. Her fees are less than any of the district's current plans, but could be less with Vanguard or Fidelity. I'm trying to convince the benefits committee to change TPA's and add Fidelity and Vanguard. If I can't get them to change we will do that, but I am meeting resistance. Originally the TPA told me that she had to be 59 or terminate employment to transfer the funds out, but the more I look into it I think that is only to transfer to an IRA. I am wondering if setting up a self employed 401k while continuing to work for the district would be a loophole of sorts to move the account. I was wondering if anyone else here has done this. 

I found this on the IRS website. I'm going to look into it more tomorrow: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-403b-tax-sheltered-annuity-plans

Plan-to-plan transfers between 403(b) plans are permitted if:

  • the terms of the transferring and receiving plans allow these transfers;
  • the transferred assets belong to a current or former employee of the receiving plan’s sponsor;
  • the accumulated benefit after the exchange is at least the same as before the exchange; and
  • any benefit restrictions of the transferring plan are maintained by the receiving plan.

 

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 Your wife has a frozen account. I had one of those and since it was no longer available in my plan due to changes I had to leave it be until I retired. But luckily it was with Vanguard so I sort of had your problem in reverse.

If its not a huge amount of money I would let it be and just move on to a better option. Maybe a new IRA or taxable account. Unless of course you wish to try and do what you mentioned above with a 401k.

Do you have Security benefit?  Or Aspire?  on her list? You could go to Direct Invest or Self direct into Vanguard or Fidelity. if you do. I'd look into that.

I can tell you Vanguard will be a challenge to add. Fidelity might be easier.  I would keep up the pressure.

Let us know what you accomplish as your information/situation could help others.

 

 

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Just to restate the obvious, there are actually two questions at play:

  1. What types of accounts can 403b accounts be rolled into?
  2. We all know you can roll 403b accounts over when employment is terminated, but are there loopholes associated with simultaneously having multiple employers or simultaneously running your own business?

The answers for #1 are obtained very easily.

I'm not sure about #2. My gut tells me that you have to terminate employment regardless of whether you're working another job or running your own business. Please report back if you find a definitive answer. I suspect the answer may depend on the plans the district negotiated with the vendors...but I also think those agreements are pretty uniform across the country.

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