Exempt Organizations Advisory - IRS Extends 403(b) Retirement Plan Deadlines

Anne E. Moran (amoran@steptoe.com)
Catherine W. Wilkinson (cwilkinson@steptoe.com)
Suzanne Ross McDowell (smcdowell@steptoe.com)

On December 11, the IRS issued Notice 2009-3, which announced that public schools, colleges and universities, and other tax exempt organizations can have an extension of time (beyond January 1, 2009)  to complete written 403(b) retirement plan documents.

The IRS will treat these plans as meeting the requirements of 403(b) and the regulations for new written plans or amended existing plans during the 2009 calendar year if:

• By December 31, 2009, the plan 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 the plan document and allowing these plans to make remedial amendments to retroactively correct plan provisions under rules that similar to those that apply for 401(a) qualified plans.

The IRS will also publish a request for comments on a draft revenue procedure for obtaining Service approval of prototype 403(b) plans that will be adopted by eligible employers, and on sample plan language for drafting prototype plans.