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CCH® PENSION AND BENEFITS — 9/19/08

IRS official warns 403(b) plans on 2009 deadline for compliance with final regs

IRS Tax Exempt and Government Entities Senior Tax Law Specialist Robert Architect urged benefits professionals to start making sure in earnest that employee plans of schools and tax-exempt entities under Code Sec. 403(b) are in compliance with the final regulations that were released in July 2007 (CCH Pension Plan Guide ¶24,508U ). While the initially proposed general effective date for the regulations had been set for January 1, 2008, the final regulations had postponed general compliance only until January 1, 2009, a date that apparently will not be postponed further.

Architect, speaking at a September 4, 2008 program presented by the American Law Institute-American Bar Association in Washington, D.C., issued this advice in presenting a general update on the IRS’s activities in the area of 403(b) plans, including the development of a pre-approval program. Architect also dispelled some of the myths relating to the regulations.

403(b) pre-approval program

According to Architect, the Listing of Required Modifications (LRMs), a collection of information packages designed to assist sponsors who are drafting 403(b) plans to comply with the regulations, will be posted on the IRS’s website in the “near term” for comments. He expects the pre-approval program for 403(b) plan documents to be available in the spring of 2009. “We are making great progress,” he remarked. The IRS is still working on a determination letter process that will allow plan sponsors to request a determination letter, if needed, Architect added.

403(b) reg “myths”

Architect shared with practitioners some of the common myths he has heard regarding the Code Sec. 403(b) regulations, such as:

- Sponsoring employers must have information-sharing agreements with all vendors by January 1, 2009;

- Plan participants must transfer their accrued benefits to a single vendor by January 1, 2009, if an employer terminates all other vendors in 2008; and

- Rollovers of retirement benefits will be restricted in 2009 and beyond.

Written plans must be adopted

Although most employers have written plans at this stage, Architect expressed his concern that public education and small tax-exempt entities may forget to adopt such plans. “A written plan is of no good if it is not memorialized by adoption before 2009,” he  said.

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