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LATEST NEWS
Final Regulations issued by the IRS in 2007 included a requirement that plan sponsors must adopt a written 403(b) plan before January 1, 2009. Last week the IRS Notice 2009-3 delayed this requirement for one year. Those sponsoring 403(b) s now have until December 31, 2009 to adopt a written plan. For PDF Click Here
Please note: The IRS did NOT delay the effective date of other requirements contained in Section 403(b) and the Final Regulations. The IRS titled the Notice: “Relief From Immediate Compliance with 2009 Section 403(b) Written Plan Requirement.” Sponsors must still operate 403(b) plans during 2009 in accordance with a “reasonable interpretation” of the 403(b) rules, provided that the sponsor makes its “best efforts” to correct any operational failures during 2009. Including the two highlighted terms allow the IRS to retain its authority to interpret actions taken by plan sponsors.
While it may be wise to delay adoption of a written document until later in 2009, and we anticipate that the IRS will take a cooperative approach in their 403(b) enforcement during 2009, we still recommend that you act now.
- If you don’t understand the regulations, find an expert that can help you design procedures based on a “reasonable interpretation” of the current rules.
- Review your plan operations.
- Correct any deficiency as soon as possible.
Establishing a record of your “best efforts” to immediately comply is important. Penalties for non-compliance may be restricted to individual participant accounts, but, failure to meet certain plan rules “could affect all participants so that none of the contracts issued under the plan would meet the 403(b) requirements, and all plan contributions and earnings would be taxable.”