January 15, 2009
Previously published on December 2008
The IRS has extended the written plan document deadline for 403(b) plans. On December 11, 2008, the IRS published Notice 2009-3 providing 501(c)(3) organizations and educational institutions additional time to adopt a written plan document for their 403(b) plans. According to this notice, 403(b) written plan documents must now be adopted on or before December 31, 2009. The notice also describes programs the IRS intends to establish to facilitate ongoing 403(b) compliance.
Background
Final regulations under Internal Revenue Code section 403(b) were published on July 26, 2007. The regulations require plan sponsors to adopt a written plan document that complies with the regulations on or before December 31, 2008. This deadline has now been extended until December 31, 2009. Ongoing good faith operational compliance with the 403(b) regulations is required until that time.
Impact of Notice
The IRS will not treat 403(b) plan sponsors as failing to satisfy the requirements of § 403(b) and the final regulations during 2009, provided that: (1) on or before December 31, 2008, the sponsor of the plan has adopted a written § 403(b) plan that is intended to satisfy the requirements of § 403(b) (including the final regulations) effective as of January 1, 2009; (2) during 2009, the sponsor operates the plan in accordance with a reasonable interpretation of § 403(b), taking into account the final regulations; and (3) before the end of 2009, the sponsor makes its best efforts to retroactively correct any operational failure that occurs in 2009 to conform to the terms of § 403(b) plan as ultimately written.
The IRS intends to establish a pre-approved prototype program and a determination letter program for individually designed plans.
Looking Ahead
Although the IRS has extended the written plan document requirement for 403(b) plan sponsors, this is just one of the many aspects of 403(b) compliance. Section 403(b) plan sponsors that have not reviewed their plans for operational compliance should do so immediately, as operational compliance with the 403(b) regulations is required by January 1, 2009. If you have any questions about your 403(b) program, please contact a member of the Employee Benefits & Executive Compensation practice group.
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