Repay 403B transferred to an IRA

[Dan32]

Wondering if anyone has experience with the following:

A few years ago DW retired and transferred her 403B to an IRA. Since she was not vested at the time she "lost" her company match. She then returned to work a few months later with the same company in a very part time position. When she turns 65 she will automatically become vested (she hasn't worked enough hrs previously to meet the company's vesting requirement).

If she turns returns the withdrawal, the company match will be returned to her according to the plan documents. Some complicating factors and questions which are currently unanswered are listed below:

1. A different brokerage (Fidelity) is now managing the plan than the brokerage that managed it when she made the withdrawal.

2. Since she worked part time and contributed much more than the company match her withdrawn amount is ~25X the company match.

3. It is somewhat unclear if she will have to repay the entire amount withdrawn or only the amount that was employer matched. We believe it might be the entire amount.

4. It is still unknown how long the money has to remain in the 403B to qualify for the company match before it can be withdrawn again.

5. The plan documents clearly indicates that she is entitled to have this match returned. However, if this money comes from the company, the old brokerage, or the new brokerage isn't clear.

 

[gauss]

Are you reading the (SPD) Summary Plan Document or the full legal Plan Documents?

I have found that getting the full legal Plan Documents can sometime shed more light than the SPD does.

-gauss

 

[TheWizard]

Step one is to clarify all those details...

 

[Dan32]

I am referring to the Summary plan document (30 pages long). I don't have access to a more detailed "legal" document that explains in more detail how the actions actually occur.

We've been trying to get the details clarified. So far several phone calls have only clarified that the HR department doesn't have much experience with this situation.

 

[gauss]

I am referring to the Summary plan document (30 pages long). I don't have access to a more detailed "legal" document that explains in more detail how the actions actually occur.

We've been trying to get the details clarified. So far several phone calls have only clarified that the HR department doesn't have much experience with this situation.

You will need to write the plan administrator to explicitly make an ERISA request for the plan document. I suspect that some of the details will be provided near the end of the SPD on how to make this request.

If desired, I can share a redacted version of the letter that I wrote to get our legal Plan Document. FWIW I thought they would charge me a page copying fee when I made my request, but no fee was charged in my case.

-gauss

 

[SecondAttempt]

We did something like this. On the surface it sounds completely different but probably covered by the same section of the tax code. Ex-wife left state university in ~1994, cashed out her 401(a) and rolled into an IRA. This resulted in her losing a few years of credit in the state retirement system. She returned to employment under the same state retirement system a few years later.

Almost 20 years later she had the option to buy back the years she sacrificed just by returning the ~$11k she had cashed out. Those extra years allowed her to retire several years earlier at the same pension. Even though that IRA had grown to over $150k, she only had to return what she had withdrawn. To me this made no economic sense but we jumped on it. Her pension was based on highest average compensation and triggered by points (age+ years of service). She made out like a bandit.

As others have said, the devil is in the details. You probably need to read the full plan document and potentially have a lawyer interpret it for you.

These are nothing but my ignorant guesses about your questions based on what makes economic sense and I already stated above theree is no reason to assume economic sense applies:

1. The fact the money is managed by someone else should not matter

2. Since it is a 403(3) and not a pension, the company should only care about their match. That is all she gains by being vested.

3. Based on answer to 2, I would expect it to be only the match portion that must be returned.

4. Most likely only until she becomes vested at 65.

5. It should come from whoever it was sacrificed to when she left, almost certainly the company. One concern is that 403(b) implies nonprofit so they may not legally be able to absorb a chargeback years later so there may be major roadblocks.

It sounds like if her loss would only be 4% (1/25) it may not be worth giving control back to someone else but that is a personal choice. Someone else in control could mean 1-2% fees and other restrictions.

Really, it seems like you need specifics from the company!

 

[Dan32]

Thanks for the comments so far. Reading online it seems that although all 401Ks and 403Bs allow for this payback, it is somewhat rare. The HR rep at the company we're dealing with has been there over 20 years and says he hasn't had this occur before. Secondattempt is correct that the return is a little over 4% on the total amount. If we only need to return the portion that was company matched the return is close to 100%. Also, the plan is to only leave the returned funds in the account for the briefest time possible. Therefore we're not overly concerned with fees (assuming we can get a quick 4% return). Current status is they are retrieving the records from the old brokerage before the plan was moved to Fidelity.

 

[Dan32]

Just a follow-up after a few months in case anyone has a similar situation. After many discussions we were able to recoup the employer match. The actual steps were:

1. Our current brokerage sent a check using overbite mail directly to Fidelity along with a form that we provided.

2. Fidelity reinstated the employer match into the 403(b) in ~3 days.

3. We moved the 403(B) into a new IRA at Fidelity. This was done online.

4. We moved the Fidelity IRA back to our original IRA. This was also done online. For some reason we were not able to complete the move from the Fidelity 403(b) to our original IRA online.

So the entire process (once we pulled the trigger) was ~ 2 weeks. Total fees involved were $25 for closing the Fidelity IRA and a $15 fee for overnight mail from our current brokerage. A low risk 4% return, luckily performed while the market was moving lower.