Two 403b's for 1 employer?

[littlefish]

Thanks to the wisdom of this website and all those who contribute my financial knowledge has increased exponentially. However, reading some of the posts I still have a ways to go. I feel a bit like a resident in July - with just enough knowledge to get myself into trouble.

I'm currently trying to troubleshoot a situation I got myself into after rolling over my fellowship employer's 401a/403b into a traditional IRA. Now that I've learned about the pro-rata rules, I am trying to rollover my traditional IRA into my current employer's 403b plan.

My employer has 3 brokerage options: Fidelity, TIAA, and Vanguard. My 401a/403b/457 (as well as my traditional and roth IRAs) are with Vanguard. Interestingly, my employer Vanguard accounts do not allow for traditional IRA rollovers.

However, I just learned that Fidelity does allow for a rollover into their 403b plan. The Fidelity rep says it is no problem to have 2 403b plans from the same employer. The Fidelity one would house the rollover money from my Traditional IRA and I could continue to contribute to the Vanguard just as before. This would free up my Traditional IRA to allow for future backdoor Roth conversions.

Is this legitimate?

[spiritrider]

It wouldn't be two 403b plans. It would still be within the same 403b plan, but with two 403b accounts at different 403b custodians. I do not have direct knowledge of this. However, in many 403b plans you can "shop" among the 403b custodians. Also, rollovers never interfere with other contributions.

I have no reason to believe it is illegitimate. Fidelity is a very conservative institution. It is their butt on the line with the IRS.

[DMFA]

Sounds like a plan. I like Fidelity NetBenefits for my wife's 403(b). You may possibly need to make a salary deferral to it for one pay period to open the account...if so, not a big deal.

[litovskyassetmanagement]

spiritrider wrote:

It wouldn’t be two 403b plans. It would still be within the same 403b plan, but with two 403b accounts at different 403b custodians. I do not have direct knowledge of this. However, in many 403b plans you can “shop” among the 403b custodians. Also, rollovers never interfere with other contributions.

I have no reason to believe it is illegitimate. Fidelity is a very conservative institution. It is their butt on the line with the IRS.

Click to expand...

I believe you can have multiple 403b options under the same employer, that's not having multiple 403b plans, but rather different sub-accounts (the term some use is multiple-vendor plan):

https://www.universitybusiness.com/article/single-vs-multi-vendor-critical-decision-403b

I see this once in a while, usually at universities and hospitals, quite an old arrangement, new plans don't do this as there is no need because with a single record-keeper you can use all of the funds, but they probably think they are diversifying and providing more choices at the same time (whereas in reality this adds nothing but extra confusion).  403b are often non-ERISA plans, so all of these providers are nothing more than brokers, not acting in any fiduciary capacity.

Fidelity has been sued for various breaches before (for excessive fees and other fiduciary breaches) - they definitely are not that great as a TPA, and as a service provider they should be overseen by other knowledgeable providers (especially if they are providing investments and advice to the plan, since they never act in a fiduciary capacity).