IRS Extends 403(b) Document Adoption Date

         On December 11, 2008, the IRS issued Notice 2009-3, which provides relief for sponsors of 403(b) retirement plans with respect to the requirement to have a written 403(b) plan in place by January 1, 2009.

         According to the IRS news release that accompanied the notice, 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 one more year to put their plan documents in place.

         However, as the IRS points out, plan sponsors that wish to avail themselves of this extended timeline and have their plan treated as having been in compliance for 2009 must comply with all of the following three requirements:

Ø      By December 31, 2009, the plan sponsor of the plan must adopt a written 403(b) plan that is intended to satisfy the requirements of Internal Revenue Code (Code) Section 403(b) and the final 403(b) regulations.

Ø      During 2009, the plan sponsor must operate the plan in accordance with a reasonable interpretation of Code Section 403(b) and the final 403(b) regulations.

Ø      By the end of 2009, the plan sponsor must make its best effort to retroactively correct any operational failure during the 2009 calendar year to conform to the written plan.  This correction should follow the general principles of the Employee Plans Compliance Resolution System (EPCRS) under Rev. Proc. 2008-50. 

         In the notice, the IRS states that it plans to issue further guidance on 403(b) plans, including a revenue procedure establishing prototype and determination letter programs for 403(b) plans to obtain IRS approval of the plan document.  After 2009, the revenue procedure will also allow these plans to make remedial amendments to retroactively fix plan provisions under a modified version of EPCRS.

         For information on how Notice 2009-3 impacts your 403(b) plan contact your Employee Benefits attorney at Ice Miller LLP or Jim Kemper, Mary Beth Braitman, or Tara Schulstad Sciscoe.