In a webcast sponsored by the National Institute of Pension Administrators (NIPA), Linda Segal Blinn, vice president of technical services at ING, noted that for 403(b)s, a transfer is from plan-to-plan, moving a balance from one 403(b) to another 403(b). It must be a direct transfer so the employee does not touch the money and no taxable event occurs. Both plans must permit transfers.
According to Segal Blinn most plans are not permitting transfers because there are too many grandfathered amounts that must be preserved: i.e. pre-tax accounts, post-tax accounts, employer-contributed accounts, amounts subject to a joint and survivor (J&S) annuity and 12/31/88 grandfathered amounts from annuity contracts, which can be accessed immediately.
An exchange is the movement of participant accounts among vendors in the same 403(b) plan. The plan must permit exchanges, and no distributable event is required. Again, it must be a direct exchange so the employee does not touch the money and no taxable event occurs. Grandfathered amounts are preserved.
Finally, plans can allow for rollovers from one eligible retirement plan to another. The receiving plan must also permit rollovers in. The rollover can be direct to the receiving plan or indirect, going to the participant first. There is tax reporting. A rollover requires a distributable event, such as employment termination or retirement.
Segal Blinn said most plans will allow rollovers, since grandfathered amounts are not preserved.