Switch 403b Providers Without Penalty (until Sept 24th)

403(b) plan sponsors, unlike 401k sponsors, don’t actually manage the investment plans made available in the 403(b). In fact, 401k providers have “fiduciary responsibility,” meaning they must act in the best interests of their employees or suffer legal consequences. So, for many 403(b) plan members, a recent change in the IRS code, which kicks in September 24th, makes it much harder to move your retirement assets from your current 403b into one with friendlier, cheaper, and better options. According to CNN Money article, many 403(b) investment options have “high-fee, low-performing investment choices” because the plan sponsors aren’t responsible for choosing them.

If you want to move your funds, you have to do it by Sept. 24th (meaning the forms must be in the mail by Sept 17th) to avoid the move being classified as a disbursement (payment). This move is called a 90-24 transfer (named after the section of the IRS Code that permits it) and is not a taxable event. Now, you can still do that as long as the new 403(b) has an agreement with your current 403(b) that includes periodic sharing of your information. If they don’t have a written agreement in place, you can’t move it without it being taxed. It’s a crummy situation so be quick to move your funds now while you can.