A new client has an existing 403B with security mutual who is not
accepting 403B transfers or participating in new 403Bs.

They are treating existing plans as separation of service (because this is life insurance)and offering the following options:
1) purchase the policy,thereby maintaining it out of the 403B
2) distribute the policy and maintain it on an unqualified basis
3) Surrender the policy
4) exchange it for a new life insurance policy.

If nothing is done before 1/16/09 it will becomea reduced paid up policy
(which to me is the only logical option , assuming they are right .

The client is age 50 ,not retiring, not separating from service .
Security claims this is a separation of service because it is a life insurance
policy .

My question , is are they right declaring this a separation of service ?
Could this be rolled over to an IRA by , of course using the cash surrendered proceeds of the insurance ?

I have all of the above information from the company ,but am doubting the
information.