403(b) Plans: IRS Announces End Date for 403(b) Remedial Amendments

All 403(b) plans were required to have a plan document by December 31, 2009. In spite of this requirement, no documents were actually approved by the IRS in 2009 or at any time since then until now.

All organizations sponsoring 403(b) plans must now “restate” their plan documents onto an IRS approved document by March 31, 2020. Restatement on an IRS pre-approved plan gives the sponsoring organization reliance that the provisions in the pre-approved plan are compliant with IRS rules and regulations and that the plan assets are protected from taxation. The IRS approvals of these documents are being issued now.

This restatement and the resulting protection will go back to January 1, 2010.

All plan amendments are required to be noted in the restatements, and certain changes will be required of annuity contracts and custodial agreements funding 403(b) plans. The new documents will include an administrative appendix which will articulate the employer’s responsibility to “audit” the vendors each year. An IRS audit would then include documentation of the vendor audit. Plan Sponsors may wish to discuss the items needed for this vendor audit with their advisor or with their 3(16) fiduciary.

As a TPA with a substantial ongoing commitment to 403(b) plans and their sponsors, QBI is and will be prepared to help with these tasks. The plan documents used by QBI have been pre-approved or are in the final stages of this process. We expect to be able to start restating plans onto the pre-approved documents in May or June of this year. Although there is a natural tendency to wait until later in the 3 year period to contract for this work, the fee incentives offered by QBI will favor the early adopter.

-Patricia Neal Jensen