Thursday, December 18, 2008

403(b) Written Retirement Plan Relief

Another notable gift to the exempt organization community, the IRS recently issued a notice(pdf) that it has amended the requirement that organizations adopt a written plan under 403(b) by January 1, 2008. The Service has stated that:

The IRS will treat these plans as meeting the requirements of 403(b) and the regulations 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.
This notice provides considerable relief for organizations who faced being penalized, or their employees retirement benefits taxed, for failure to provide a written plan. The additional time should allow organizations to prepare and implement written 403(b) plans. The IRS will also be issuing model 403(b) plans in the coming year in order to assist organizations with compliance.

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