4094 / Can a 403(b) plan be frozen or terminated?
Yes, if certain conditions are met.
An employer is permitted to amend its 403(b) plan to eliminate future contributions for existing participants, or to limit participation to existing participants and employees. A 403(b) plan also is permitted to contain provisions that provide for plan termination and that allow accumulated benefits to be distributed on termination.1
In the case of a 403(b) contract that is subject to distribution restrictions relating to
custodial accounts and 403(b) elective deferrals, termination of the plan and the distribution of accumulated benefits is permitted only if the employer does not establish a successor 403(b) plan by making contributions to any 403(b) contract that is not part of the plan during the period beginning on the date of plan termination and ending twelve months after distribution of all assets from the terminated plan, taking into account all entities that are treated as the same employer under IRC Sections 414(b), 414(c), 414(m), or 414(o) on the date of the termination.