Updated August 25, 2026. Quick answer: Moving a 403(b) to a cheaper vendor inside the plan is a contract exchange, and the regulation sets three conditions: the plan must provide for it, your balance must not fall, and your employer must enter an agreement with the receiving issuer. The phrase almost everyone uses for the third one, an information-sharing agreement, appears nowhere in the regulation or in Publication 571. The exchange is not a distribution, so no tax and no penalty fall on it, and the surrender charge is the entire cost.
What is usually said, and what the sources say
Advice on escaping a high-cost 403(b) usually stops at you can move it, or at there being ways around the surrender charge, and often calls the mechanism an information-sharing agreement, as though that phrase were the rule.
The rule is three conditions in one regulation, and the phrase most often used for the third one does not appear in it. The regulation requires the plan to provide for the exchange, the accumulated benefit not to fall, and the employer to enter into an agreement with the receiving issuer to exchange named categories of information. That is why a teacher cannot move unilaterally to any low-cost provider on the internet: the employer has to be a party to it.
The move the regulation permits
The general rule is short: “a section 403(b) contract held under a section 403(b) plan is permitted to be exchanged for another section 403(b) contract held under that section 403(b) plan” (26 CFR 1.403(b)-10(b)(1)(i)). Two limits are in the same paragraph. It has to be another 403(b) contract — “a section 403(b) contract may not be exchanged for an annuity contract that is not a section 403(b) contract” — and the move happens under your employer’s plan, not around it.
The good news is in the same paragraph and is routinely missed: “Neither a plan-to-plan transfer nor a contract exchange permitted under this paragraph (b) is treated as a distribution for purposes of the distribution restrictions”, and “no amount is includible in gross income by reason of such a transfer or exchange” (26 CFR 1.403(b)-10(b)(1)(i)). Moving is not cashing out. No income tax, no additional tax before 59 and a half, no reporting event. Whatever the surrender charge is, it is the whole cost.
The three conditions, quoted
| The condition | What the regulation says | What it means for you |
|---|---|---|
| (A) the plan provides for it | “The plan under which the contract is issued provides for the exchange” | Your employer’s plan document is the first gate. A plan that is silent on exchanges has not met condition (A). |
| (B) the balance does not fall | “The participant or beneficiary has an accumulated benefit immediately after the exchange that is at least equal to the accumulated benefit of that participant or beneficiary immediately before the exchange” | The receiving contract must credit at least what the old one held. This is a floor on the transfer, not on the surrender charge, which is a term of the contract you are leaving. |
| (C) restrictions carry, and the employer signs | “The other contract is subject to distribution restrictions with respect to the participant that are not less stringent than those imposed on the contract being exchanged, and the employer enters into an agreement with the issuer of the other contract under which the employer and the issuer will from time to time in the future provide each other with the following information” | This is the condition that makes the move a three-party act. The employer has to enter an agreement with the receiving issuer. You cannot supply it yourself. |
26 CFR 1.403(b)-10(b)(2)(i), quoted in full. The phrase information-sharing agreement, which is how this condition is almost always described, appears nowhere in the section, and nowhere in IRS Publication 571 either.
Condition (C) is the one that decides whether this is available to you, and it is worth being exact about the wording. The regulation requires an agreement under which the employer and the issuer exchange the listed categories of information. The practitioner shorthand for that — an information-sharing agreement — is not the regulation’s language. Searching the section for the phrase returns nothing, and so does searching IRS Publication 571. The requirement is real; the phrase is not quotable as regulatory text, and asking a benefits office for something by a name that appears in no rule is a good way to be told it does not exist.
The practical shape of it: you cannot do this alone. Two of the three conditions are about your employer — whether its plan provides for exchanges, and whether it will sign with the receiving issuer. The vendors already on the approved list generally have the agreement in place, which is a large part of why the list is what it is.
Check the plan against the rest of your retirement savings
A 403(b) decision usually turns on what the product costs, what leaving it would cost and what else you are saving into, and an adviser can weigh those together.
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Why 2007 is the year everything changed
Before 2007 a teacher could move a 403(b) to almost any provider without asking anyone. The vehicle was Revenue Ruling 90-24, and the Treasury decision that replaced it says so in the list of things commenters objected to: “The elimination of Rev. Rul. 90–24 (1990–1 CB 97), which allowed a section 403(b) contract to be exchanged for another contract” (T.D. 9340, 72 Fed. Reg. 41128, 41129).
The reason given is compliance, not cost. The preamble explains that where balances scatter across carriers with no connection to the employer, “employers encounter substantial difficulty in demonstrating compliance with hardship withdrawal and loan rules” (T.D. 9340, 72 Fed. Reg. 41128, 41135). The final rule kept the exchange and attached the employer to it: “The regulations allow contract exchanges with certain characteristics associated with Rev. Rul. 90–24, but under rules that are generally similar to those applicable to qualified plans” (T.D. 9340, 72 Fed. Reg. 41128, 41135).
So the honest history is not that anyone banned low-cost 403(b) providers. It is that the unilateral route closed, the employer became a necessary party, and the vendors who already had distribution inside school districts were the ones with the relationship to make the new route work.
What this page does not settle
This page quotes the exchange rule and the history that produced it. It is not advice on whether to move, and it does not read any particular plan document.
Whether your own plan provides for exchanges is a question about your plan document, and no source we read answers it for any particular district. The regulation makes the plan’s own terms condition (A); it does not supply them.
The regulation does not require the employer to sign an agreement with any issuer you name. It states what must be true before an exchange counts. A refusal is not necessarily unlawful, and nothing here is advice about how to challenge one.
Nothing here covers a plan-to-plan transfer between two employers’ plans, a rollover after severance, or a 90-24 contract that predates the current rules and is grandfathered. Each is a different paragraph of the same regulation and none is worked through on this page.
Sources
- 26 CFR 1.403(b)-10(b)(1)(i) — https://www.law.cornell.edu/cfr/text/26/1.403(b)-10
- 26 CFR 1.403(b)-10(b)(2)(i)(A) — https://www.law.cornell.edu/cfr/text/26/1.403(b)-10
- 26 CFR 1.403(b)-10(b)(2)(i)(B) — https://www.law.cornell.edu/cfr/text/26/1.403(b)-10
- 26 CFR 1.403(b)-10(b)(2)(i)(C) — https://www.law.cornell.edu/cfr/text/26/1.403(b)-10
- T.D. 9340, 72 Fed. Reg. 41128, 41129 — https://www.govinfo.gov/content/pkg/FR-2007-07-26/pdf/07-3649.pdf
- T.D. 9340, 72 Fed. Reg. 41128, 41135 — https://www.govinfo.gov/content/pkg/FR-2007-07-26/pdf/07-3649.pdf
- CalSTRS 403bCompare product registry, fetched 2026-08-25 — https://www.403bcompare.com/ProductCompare
Related: 403(b) Surrender Charges · 403(b) Surrender Charge vs Stay Calculator · Why a School District’s 403(b) Vendor List Is Mostly Annuities · What happens to your 403(b) when you leave · 403(b) withdrawal rules · 403(b) vs 457(b): which to fund first.
General information drawn from the federal statutes and regulations, the California Education and Insurance Codes and the CalSTRS 403bCompare registry named above, not legal, tax or financial advice. Statutes are amended and registered products change; the figures here are what each source said on the date above, and each is linked so you can check it.