I came across this issue. If the employer wants to terminate an Annuity plan, what happens to the outstanding loans that participants have?
Everything that I have looked refers to situations when there is termination of employment but nothing about when the plan is terminated.
Generally plan documents do no provide for something like that (i think is a good idea to start amending plans to cover it too)

Anyone has any suggestions????

Thanks

The 403b regs issued by Treasury only require the contract to be part of an employer's written 403b plan to exclude contributions from taxable income of the employee. In Rev Proc 2007-71, the IRS without saying so much implied that 403b contracts that have received any contributions since 1/1/2005 need to be maintained pursuant to an employer's written 403b plan (granted, Rev Proc 2007-71 'deems' this requirement met if there is even fairly minimal attemps at contact by the employer with the vendor or vice versa, even if the vendor does not agreed to subjugate its 403b contracts to the employer's written 403b plan).

Your situation suggests that you are dealing with 403b contracts that are in fact subjugated to an employer's written 403b plan. Termination of a 403b plan requires that all benefits be distributed. Thus, the subjugated 403b contracts cannot remain 403b contracts. There must be distributions either to IRAs (which cannot hold as an asset a loan for which the IRA owner is the obligated debtor) or to another type of employer plan that will accept and finish administer the collection of the loan. If the employee does not have eligibility to roll into another employer plan that handles loans, then the loan must either be paid off before the distribution incident to the 403b plan termination or the loan balance then be a taxable distribution to the employee.

I don't know how you'd amend a 403b plan to any other treatment. These are the tax law rules.

Thanks JSimons for the reply. I wanted to clarify something. I know that the 403(b) plan can not be amended to avoid tax penalties if these loans are considered to be "deemed distibution" what I was referring to was to include something in the plan document that states "in event of plan termination the loans are due in full" in order to avoid any other liabilities that the plan may have for providing these loans to participants without any notice of what would happen in case the plan is terminated.