Can 403(b) Plan Annuities Be Mapped to Replacement Funds?

Q: We are a 403(b) plan sponsor attempting to streamline our investment lineup, but our investment provider claims that their fixed and variable annuities cannot be mapped to replacement funds. Is this correct?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: This is likely accurate, but you should review the annuity contracts in question to confirm. Unlike 401(k) plans, where employers and trustees can direct existing investments to be mapped or transferred to replacement funds, 403(b) plans are generally not invested in trusts, but in fixed or variable annuity contracts and/or custodial accounts (mutual funds). Some of these contracts may not permit mapping of investments to replacement investments without obtaining individual consent from participants. In those situations, the employer may direct all future contributions toward the replacement investment, but existing assets must remain in the replaced investment unless the participant elects to transfer their assets out of it.


NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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