Ahhh, section 110 of the SECURE Act. What nerdy retirement plan stuff are we talking about? One of the issues 403(b) Plan Sponsors have faced is what to do with old participants that were in their plan if the Plan Sponsor wanted to move to terminate the plan. Since these tend to be individual contracts, the Plan Sponsor has no control over moving these assets out of the plan.
Due to this, many of these plans have former participants in their plans and until now, have had very few options to pursue. While 403(b)(1) accounts could create a distribution since 2007 thus allowing them to eventually terminate their plan, 403(b)(7) accounts have been unable to do this.
The SECURE Act cleaned up this language (somewhat) and now these contracts can be distributed without creating a taxable event. The “how” is still awaiting further comment but the good news is this will be retroactive back to 12/31/2018. For Plan Sponsors that have been unable to terminate a plan or for those that might be better served by another type of plan design, they now have the option of pursuing this new option.