Transferring 403(b) vendors

#1

Good morning, Jeremy, Vivi, everyone!

I’m in the first year of my job at a high school. I mistakenly opened a 403(b) with a high-fee vendor (I thought they were my only option…). Now, I know that Vanguard is an available vendor (which is incredible). I’m working with my current vendor and Vanguard to complete the transfer process. I only had my paycheck deducted once before I paused deductions, so there isn’t much money with the vendor. BACKGROUND: I have a 403(b) versus an IRA because our household income is above the IRA limits.

My question is: is there any tax issue or other penalty/concern I should be aware of due to switching vendors? I believe my current vendor charges a small fee for the transfer, but other than that, I’m not aware of anything else.

Any information would be greatly appreciated - thank you in advance!

Nick

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#2

Hi Nick! It’s a good question. A lot of the answer depends on what your 403(b) plan allows and what both of the vendors allow in this instance. Usually, you aren’t able to do any form of a transfer until you leave the employer. But, in the case of some 403(b) plans, where there can be multiple vendors, sometimes they allow it - which it sounds like from what you said they do in this instance. There should not be any penalties or tax concerns BUT it all depends how your vendors handle it - so I would make sure you continue to talk with them about it and have them walk you through all of the details.

Sorry I couldn’t give more of a concrete answer. I think the best plan will be to talk with both vendors and ensure they can give you the exact steps on how to do it to avoid any taxes/penalties!

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