401(k) and 403(b) are a lot alike, but the two shall not merge

Thanks to regulations, 403(b) plans are becoming more and more like 401(k) plans. It’s to the point were many advisors and third-party administrators get the idea they can merge or convert the plans, especially trying to morph a 403(b) into a 401(k) plan, but they can’t.

A 403(b) plan of a 501(c)(3) tax-exempt organization can’t be merged with a 401(k) plan; the only exception involves churches, which, subject to certain restrictions, were permitted to merge 401(k) and 403(b) plans that they sponsor.

The only way to move 403(b)money into a 401(k) plan is a plan termination where participants would elect the right to rollover their plan assets to a new 401(k) plan or an IRA. Until we get legislation that will allow a merger, we will still have this workaround.

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