403 (b) Retirement Plans

403(b) Retirement Plans Get Extension on Time to Complete Written Plans

The IRS issued a notice on December 11, 2008 announcing relief for 403(b) plans that do not have a written plan in place by January 1, 2009. The IRS is extending the deadline for plan sponsors to adopt new written plans or amend existing plans to satisfy the requirement of the final 403(b) regulations. This extension will give plan sponsors additional time to put their plan documents in place.

Employers should be sure to review their 403(b) plan operational rules as soon as possible to ensure that the plans are being operated in accordance with a reasonable interpretation of Section 403(b) and the related final regulations.

The new guidance is for 403(b) plans covering employees at public schools, colleges and universities, and other tax exempt organizations. Sponsors of 403(b) plans (both ERISA and non-ERISA) are generally required to maintain a written plan that satisfies, in both form and operation, the requirements of the final 403(b) regulations.

The IRS will treat these plans as meeting the requirements of 403(b) and the regulations during the 2009 calendar year if:

By December 31, 2009, the sponsor of the plan has adopted a written 403(b) plan, effective as of January 1, 2009, that is intended to satisfy the requirements of 403(b) and the regulations.
During 2009, the plan sponsor operates the plan in accordance with a reasonable interpretation of 403(b) and the related regulations.
By the end of 2009, the plan sponsor makes its best effort to retroactively correct any operational failure during the 2009 calendar year to conform to the written plan.

The IRS plans to issue further guidance on 403(b) plans, including a revenue procedure establishing programs for 403(b) plans to obtain IRS approval of the plan document and allowing these plans to make remedial amendments to retroactively fix plan provisions under rules that similar to those that apply for 401(a) qualified plans (e.g., 401(k) plans).

This is not to be confused with the DOL requirement that many previously unaudited 403(b) plans will require an audit beginning in 2009. The retirement plan professionals in our Retirement Plan Solutions Group can help you remain in compliance or help you determine if your plan is one that will require an audit.

Please contact either Roger Prince (rprince@bdmp.com) or Bill Enck (benck@bdmp.com) for assistance.