Benefits & ERISA Law

IRS Extends 403(b) Written Plan Requirement to December 31, 2009

By Suzanne Wynn

Today, the IRS issued Notice 2009-3, which extends the written plan requirement for 403(b) plans for one year - to December 31, 2009. Specifically, Notice 2009-3 states that:

“The Service will not treat a section 403(b) plan as failing to satisfy the requirements of section 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 section 403(b) plan that is intended to satisfy the requirements of section 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 section 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 section 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) at section 6 of Rev. Proc. 2008-50(2008-35 I.R.B. 464).”

For anyone who has a 403(b) plan who has not complied with the written plan requirement contained in the Final 403(b) Regulations, paragraph (1) provides an additional 12 months to meet that requirement. On the flipside, paragraph (2) creates a potential trap for the unwary or uneducated because it states that Notice 2009-3 is not a blanket extension of the Final 403(b) Regulation provisions. No later than 21 days from today, plans must still comply with a reasonable interpretation of the Final 403(b) Regs. For existing 403(b) plans who do not adopt a written plan which complies with the Final 403(b) Regs by December 31, 2008, it means that the plan may wind up operating in 2009 contrary to provisions in the existing plan document, and therefore create the need for the plan to utilize paragraph (3).

For any plans which do take advantage of the extension, the indication from the IRS is that they hope plans will adopt a written plan as soon as possible and not wait until December of 2009 as they expect to issue no further extensions.

pension protection act, ppa, Notice 2009-3, IRS, 403(b), ERISA

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Full post as published by Pension Protection Act Blog on December 11, 2008 (boomark / email).