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Author: Brucej616 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76082  
Subject: 403(b)rollovers Date: 12/10/1999 8:52 PM
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My public employer allows me to make 403(b)contributions to only one provider, and that provider must guarantee that I will not contribute beyond the allowable yearly amount. Only large insurance companies seem willing to make this guarantee so I'm stuck with few options and generally poor returns. With retirement only a few years away I would like to put my 403(b)investment with another company until I'm 59.5 or older. What companies would anyone recommend? Where can I look for information on 403(b)rollovers?
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Author: Dodgeball Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 16114 of 76082
Subject: Re: 403(b)rollovers Date: 12/10/1999 9:52 PM
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It sounds like your options are limited due to a "hold harmless" agreement that your employer requires its vendors to sign. I am in the same boat, since my school district will not allow me to invest in a 403b with someone who is not on our approved list.

Check around and see what other options are available. It is important to remember that 403b's invest in annuities while a 403b(7) invests in mutual funds. A 403b(7) may well have lower fees than the 403(b).

If you are permitted to invest your 403b(7) with Vanguard, I suggest that you strongly consider them. They have some of the lowest fees around, which will enable you to put all of your money to work right away. You may want to check out TMF Pixy's views on annuties at post #11725 on this board.

Hope this helps. Please post back if you have more questions.

Dodgeball

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 16131 of 76082
Subject: Re: 403(b)rollovers Date: 12/11/1999 11:58 AM
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Greetings, Brucej616, and welcome. You asked:

<<My public employer allows me to make 403(b)contributions to only one provider, and that provider must guarantee that I will not contribute beyond the allowable yearly amount. Only large insurance companies seem willing to make this guarantee so I'm stuck with few options and generally poor returns. With retirement only a few years away I would like to put my 403(b)investment with another company until I'm 59.5 or older. What companies would anyone recommend? Where can I look for information on 403(b)rollovers? >>

That depends on whether or not your employer is making matching contributions to the 403b on your behalf or not. If so, you must stay with your current provider until you retire or otherwise leave that job. If not, then you should be able to move those funds to a mutual fund company that accepts what are called 403b(7) accounts. That gives you a much wider selection of investments. Both Vanguard and Fidelity do accept such transfers.

Be aware that if you can do this and if you are in an annuity product now, then you will be required to surrender that annuity prior to transfer. The current provider may charge you some hefty fees for doing so. Additionally, your employer does not have to agree to send future contributions to the 403b(7) provider. That would mean you must do so, and you must also keep track of those contributions to ensure you do not exceed the lesser of 20% of your pay or $10K per year.

You should check with your human resources/benefits folks to see if a 403b(7) option is available to you and what's involved should you elect to undertake such a transfer of funds.

Regards..Pixy

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Author: Bob78164 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 16146 of 76082
Subject: Re: 403(b)rollovers Date: 12/11/1999 7:36 PM
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TMFPixy writes (in part):

That would mean you must do so, and you must also keep track of those contributions to ensure you do not exceed the lesser of 20% of your pay or $10K per year.

I reply:

Uh, oh. I just checked with my wife, and her total 403(b) contributions for this year exceed 20% of her gross salary by $160.11. She has received her last paycheck and made her last contribution for the year. How do we fix this? --Bob

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 16166 of 76082
Subject: Re: 403(b)rollovers Date: 12/12/1999 11:20 AM
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Bob asks:

<<TMFPixy writes (in part):

That would mean you must do so, and you must also keep track of those contributions to ensure you do not exceed the lesser of 20% of your pay or $10K per year.

I reply:

Uh, oh. I just checked with my wife, and her total 403(b) contributions for this year exceed 20% of her gross salary by $160.11. She has received her last paycheck and made her last contribution for the year. How do we fix this?>>


That's no super biggie because the amount is small. Essentially, you can just include it as income on line 7 on your 1040 and leave it in the 403b. That $103+ dollars will be taxed again on withdrawal from the plan, but over the years the compounding should offset the taxes anyway. For details, get IRS Pub 571 (Tax-Sheltered Annuity Programs for Employees of Public Schools and Certain Tax-Exempt Organizations) available at http://www.irs.ustreas.gov/prod/forms_pubs/index.html .

Regards..Pixy

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Author: Bob78164 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 16217 of 76082
Subject: Re: 403(b)rollovers Date: 12/13/1999 1:35 PM
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TMFPixy writes (in part):

That's no super biggie because the amount is small. Essentially, you can just include it as income on line 7 on your 1040 and leave it in the 403b. That [$160.11] will be taxed again on withdrawal from the plan, but over the years the compounding should offset the taxes anyway.

I reply:

Thanks, Pixy. I've now reviewed Publication 571 as you suggested, and I want to confirm my understanding. My wife did NOT defer as much as 25% of her pre-reduction salary (although, of course, since she exceeded 20% of her pre-deferral salary, she necessarily exceeded 25% of her post-deferral salary), so we are not faced with future reductions in her exclusion limits. Thus, as you describe, the only consequence is double taxation.

However, our other option is to request by March 1, 2000, that the plan custodian remit the excess contribution to us, along with its earnings. In that case, we may exclude the excess contribution this year, but we will be required to include the distribution as taxable income for 2000. As long as we receive the distribution by April 17, 2000, we will not owe the 10% penalty. In our personal situation, the income shifting may be a good thing, so I'm gonna consider this option. Is my understanding correct? Thanks again. --Bob

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 16218 of 76082
Subject: Re: 403(b)rollovers Date: 12/13/1999 1:47 PM
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Bob asks:

<<Is my understanding correct? >>

Yes, it is correct.

Regards..Pixy

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