403(b) Deadline for Written
Plan Extended!
By: Jill E. Hall

In July of 2007, final regulations under Internal Revenue Code Section 403(b) were published.  Section 403(b) plans are retirement plans available to public school employees or employees of employers that are tax-exempt organizations.  The final regulations require sponsors of § 403(b) plans to adopt and maintain a written plan that satisfies, in both form and operation, the requirements of the final regulations.  The final regulations require the written plan to be established before January 1, 2009.

On December 11, 2008, the IRS issued Notice 2009-3 which provides relief for sponsors of § 403(b) plans with respect to the written plan requirement.  The pertinent language of the Notice provides:

“The Service will not treat a § 403(b) plan as failing to satisfy the requirements of § 403(b) and the final regulations during the 2009 calendar year, provided that:

(1) on or before 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) (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 during the 2009 calendar year to conform to the terms of the written § 403(b) plan, with such correction to be based on the general principles of correction set forth in the Service’s Employee Plans Compliance Resolution System (EPCRS) . . . .”

The Service will be establishing a prototype program for obtaining Service approval of prototype § 403(b) plans.  The Service also intends to establish a determination letter program for individually designed § 403(b) plans once the prototype program is established.