In December of 2009, just a few weeks before the effective date of the final 403(b) regulations, and long after many 403(b) plans had fully complied with the regulations, the IRS announced that it was delaying the effective date for an additional year.
The IRS announced:
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 because of difficulties expressed by numerous plan administrators in meeting the current deadline of January 1, 2009. This extension will give plan sponsors additional time to put their plan documents in place.
The delay comes with the following conditions:
- By December 31, 2009, the sponsor of the plan has adopted a written 403(b) plan 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 their plan document and “allowing these plans to make remedial amendments to retroactively fix plan provisions under rules similar to those that apply for 401(a) qualified plans.” IRS New Release IR-2008-140, December 11, 2008.
KEY POINT. The IRS has announced that it will be publishing a prototype 403(b) plan that can be adopted by employers that will contain language that complies with the final regulations. In addition, the IRS will allow employers to request a private letter ruling confirming that their 403(b) program is in compliance with the tax code and regulations.
This article first appeared in Church Finance Today, March 2009.