CCC 403(b) Transactions Defined

TRANSACTION PROCESSING

Some Vendors impose specific requirements before they will process certain (or any) transactions (regular distributions, loans, hardship withdrawals, exchanges, transfers, rollovers, etc.). For example, Fidelity Investments requires “wet signatures” by the Participant and by CCC on all transaction processing forms. Before you begin the process of submitting an application for any type of transaction, be sure to check for any special requirements the Vendor(s) might require by visiting their “General Information” page(s) available on the List of All Vendors page.

View: CCC's Authorized Signatures Letter

Transactions Explained

Once an employee begins participation in the Employer's 403(b) Program, numerous types of transactions take place, beginning with the first contribution and ending with the last distribution. Along the way:

Contributions (employee contributions and/or employer discretionary or matching contributions) may be apportioned among two or more investment companies on the vendor list, depending on plan policies. Specifically, as an administrative policy your Employer may limit the number of different companies to which you may contribute at any given time.

Contributions to a specific investment company may be allocated among several investment funds of the company in question. Periodically, such allocations may be changed by the participant for various reasons, e.g., to rebalance account balances or diversify investment portfolios.

If the employer sponsoring the 403(b) Program allows Roth contributions and a specific investment company accepts Roth contributions, then contributions to that investment company may be divided between Traditional (tax-deferred) contributions and Roth (after-tax) contributions in any proportion the participant desires. However, the aggregate of a participant's Traditional and Roth 403(b) contributions to all investment companies may not exceed the participant's elective deferral limit for the calendar year.

Accumulated account balances are sometimes exchanged or transferred to other 403(b) accounts, either within the same company (internal) or to a different company (external)

A distribution of an accumulated account balance is allowed once the participant attains age 59 1/2, has a severance from employment, dies, or becomes disabled.

Once account balances become eligible for distribution, they may be rolled over into different types of eligible retirement plans (IRA, 401(k), 401(a), etc.).

Hardship distributions and loans are additional types of transactions associated with 403(b) accounts.

Appearing in the column to the right are basic descriptions of the various types of transactions associated with 403(b) programs, with explanations of how such transactions are normaly processed. While some of the terminology is standard in the industry, some is not. "Apportioned" and "allocated" are good examples of non-standard terminology and often "transfer" and "rollover" are incorrectly used as equivalents. The new 403(b) Regulations published on July 26, 2007, introduced the concept of contract exchanges within the plan.

Contact us if you have questions about any of the transactions described on this page or if you need information about a transaction type that does not appear here.

Elective Deferral Contributions

To begin elective deferrals, you must submit a Salary Reduction Agreement to your employer specifying the monthly dollar amount or percentage of salary by which your salary is to be reduced while the Salary Reduction Agreement is in force. Also, the Salary Reduction Agreement specifies the investment company or companies into which your deferrals are to be deposited and how the total deferral is to be apportioned among these companies. To change your elective deferral amount, your elective deferral percentage, your selected investment company or companies, your apportionment of deferrals among these companies, or your division of your contribution to a particular company between Traditional and Roth contributions, you must submit a new Salary Reduction Agreement to your employer.

Employer Paid Contributions

In some instances employers will enhance total compensation packages by making employer discretionary contributions to the 403(b) program on behalf of certain employees, ordinarily for upper level administrators. Employees receiving such benefits generally sign participation agreements that specify the investment company or companies into which such contributions are to be deposited and how the total contribution is to be apportioned among these companies. To change the selected investment company or companies or the apportionment of contributions among these companies, generally the employee submits a new participation agreement to the employer.

In other instances employers will arrange early retirement incentive programs or severance packages that include employer post-severance contributions for up to five years following severance from employment. Sometimes employers specify the investment company, whereas sometimes employers allow the participant to select the investment company.

Reapportioning Contributions

As described above under Elective Deferrals and Employer Paid Contributions, reapportioning contributions among selected investment companies is accomplished by submitting a new Salary Reduction Agreement or a new participation agreement to your employer. An online version of your employer's Salary Reduction Agreement is available within your employer's section of this CCC website. You may complete the form online, print it, sign it, and submit the completed form to the appropriate Employer office.

Redividing Contributions

As described above under Elective Deferrals, redividing contributions to a specific investment company between Traditional and Roth contributions is accomplished by submitting a new Salary Reduction Agreement to your employer. An online version of your employer's Salary Reduction Agreement is available within your Employer's section of this CCC website. You may complete the form online, print it, sign it, and submit the completed form to the appropriate Employer office.

Reallocating Contributions

Initially monthly contributions apportioned to a specific investment company are allocated among the company's investment funds as specified in the application for annuity contract or custodial account. Such allocations may be changed by the participant in various ways, depending on the company involved (online via the company website, by telephone, or by reallocation form). Reallocating contributions is a transaction that is handled directly between the participant and the investment company. The employer is not involved. Check the Vendors page on your Employer's section of this CCC website for availability of an online form.

Internal Transfers

After contributions have been made to various accounts or funds of a particular investment company, accumulated balances may be transferred to other 403(b) accounts or funds of the same company. Such transfers may be accomplished by the participant in various ways, depending on the company involved (online via the company website, by telephone, or by transfer form). Internal transfers are transactions that are handled directly between the participant and the investment company, unless the accounts are associated with two different Employers, in which case it may be necessary for CCC to be involved. Check the Vendors page on your Employer's section of this CCC website for availability of an online form. Currently it is not possible to transfer money from a Traditional 403(b) account to a Roth 403(b) account.

External Exchanges and Transfers

After contributions have been made to various accounts or funds of a particular investment company, accumulated balances may be exchanged or transferred to 403(b) accounts of a different investment company. Such transfers were originally authorized by Revenue Ruling 90-24, were strengthened by the new 403(b) Regulations, and generally require coordination of effort between the two companies involved and possible involvement of CCC. The new 403(b) Regulations distinguish between contract exchanges within the plan and plan-to-plan transfers. For our purposes, both types of transactions will be referred to simply as transfers.

Ordinarily the company transferring the funds requires the participant to submit a transfer request form. In addition, the transferring company often requires a "letter of acceptance" from the company receiving the transferred funds. Finally, the transferring company requires verification that the receiving company is eligible to receive exchanges and transfers in the employer's 403(b) Plan. Eligibility is determined by the receiving vendor either holding a Payroll Slot or having entered into an Information Sharing Agreement (ISA) with the Employer or the Employer's representative (e.g., with a Third Party Administrator on behalf of the Employer). Of course, an account must be established at the receiving company before an exchange or transfer is possible. This is done by submitting an application to the receiving company. Under the new 403(b) Regulations, External Transfers generally require involvement by CCC, as well as the two investment companies involved. Generally one or both companies requires the Employer or CCC to sign forms. Check the Vendors page on your Employer's section of this CCC website for availability of online forms. Our current understanding is that transferring money from a Traditional 403(b) account to a Roth 403(b) account is not allowed. Rather, you must be eligible for a distribution and then "convert" the Traditional account to a Roth account, paying taxes on the converted amount.

Internal Rollover Distributions

Once account balances become eligible for distribution, they may be rolled over into different types of eligible retirement plans (IRA, 401(a), 401(k), 457(b), etc.). If a particular company provides investment vehicles for a different eligible retirement plan type, it may be possible to rollover 403(b) account balances into another type of plan within the same company. Generally, such rollover distributions require completion and submission of appropriate company forms. Under the new 403(b) Regulations, internal rollover distributions require CCC involvement to authorize the distributions. Check the Vendors page on your Employer's section of this CCC website for availability of online forms. Currently it is not possible to make a rollover distribution from a Traditional 403(b) account to a Roth 403(b) account. On the other hand, if money in a Traditional 403(b) account is eligible for distribution, then it may be rolled over into a Traditional IRA and then transferred to a Roth IRA. However, taxes must then be paid on the amount rolled over from the Traditional IRA to the Roth IRA.

Caution - To be an eligible distribution, one of the following criteria must be met:

• Attainment of age 59 1/2
• Severance from employment
• Death
• Disability

External Rollover Distributions

Once account balances become eligible for distribution, they may be rolled over into different types of eligible retirement plans (IRA, 401(a), 401(k), 457(b), etc.). It may be possible to rollover 403(b) account balances into a different plan type account of a different investment company. Generally, such rollover distributions require completion and submission of appropriate company forms for both companies. Under the new 403(b) Regulations, external rollover distributions require CCC involvement to authorize the distributions. Check the Vendors page on your Employer's section of this CCC website for availability of online forms. Currently it is not possible to make a rollover distribution from a Traditional 403(b) account to a Roth 403(b) account. On the other hand, if money in a Traditional 403(b) account is eligible for distribution, then it may be rolled over into a Traditional IRA and then transferred to a Roth IRA. However, taxes must then be paid on the amount rolled over from the Traditional IRA to the Roth IRA.

Standard Distributions

Once account balances become eligible for distribution, they may be distributed to the participant or the designated beneficiary. Generally, such distributions require completion and submission of an appropriate vendor company form. Under the new 403(b) Regulations, distributions of any type require CCC involvement to authorize the distributions. Check the Vendors page on your Employer's section of this CCC website for availability of online forms.

457(b) Hardship Distributions

Click here for the rules that apply to 457(b) hardship distributions, which are more accurately described as "unforeseeable emergency" distributions. The rules are significantly different for hardship distributions in 403(b) and 457(b) plans.