Stop the Presses: Written Plan Document Requirement for Section 403(b) Plans Extended to December 31, 2009

December 16, 2008

On December 11, 2008, the Internal Revenue Service issued Notice 2009-3, which extends the deadline for adopting a written plan document for Section 403(b) plans from its original January 1, 2009 effective date to December 31, 2009.

The final Section 403(b) regulations that were published in 2007 require sponsors of Section 403(b) plans to maintain a written plan document that satisfies, in both form and operation, the requirements of the final regulations. Under the regulations, sponsors were required to comply with the written plan document requirement by January 1, 2009 – the general effective date for the regulations. In light of the difficulty that many plan sponsors are having in meeting this requirement, the Treasury department and the Internal Revenue Service has extended the deadline for compliance to December 31, 2009.

The new Notice provides that sponsors of Section 403(b) plans will be in compliance with Section 403(b) and the final regulations if they take the following steps:

  1. By December 31, 2009, adopt a written plan document that satisfies the requirements of Section 403(b) and the final regulations, and that is effective as of January 1, 2009;
  2. During 2009, operate their plans according to a reasonable interpretation of Section 403(b), taking into account the final regulations; and
  3. By December 31, 2009, make their best efforts to retroactively correct any errors made in operating the plan during the year.

In addition to extending the deadline for the written plan document requirement, the Notice also indicates that additional guidance is forthcoming regarding a prototype plan document program and sample plan language for drafting prototype plans. This guidance will also provide for a retroactive remedial amendment of Section 403(b) plans for years after 2009. The Internal Revenue Service further indicated that it intends to establish a determination letter program for individually designed Section 403(b) plans once the Section 403(b) prototype program is established. Finally, the Internal Revenue Service intends to modify the Employee Plans Compliance Resolution System (“EPCRS”) to include additional Section 403(b) issues. Currently, only a limited set of Section 403(b) plan errors can be corrected under EPCRS.

For further information or help analyzing the impact of the extension of the Section 403(b) written plan document requirement, please contact any member of the McGuireWoods Employee Benefits or Labor & Employment teams, including: