New Year’s Resolution for 403(b) Plan Sponsors

January 14, 2020

Authored by: Denise Erwin and Sarah Bhagwandin

Previously we posted on our blog about a deadline looming in the distance for 403(b) plan sponsors to adopt a pre-approved plan document.  Now that 2020 has arrived, the deadline is just around the corner and imminent action is required.

As you may know, if a plan sponsor retroactively adopts a pre-approved plan by the last day of the remedial amendment period on (3/31/2020), it will automatically be deemed to have corrected any form defects in the plan document it previously adopted and will be considered to be in compliance with applicable plan document requirements back to January 1, 2010.

This opportunity is important because although an individually designed plan can be amended to correct any form defects prior to the end of the remedial amendment period, the IRS has opted against establishing a determination letter program for 403(b) plans at this time.  As a result, adoption of a pre-approved plan document is the only way to obtain assurance from the IRS that a 403(b) plan document is fully compliant.

For more background and our suggested Action Steps, see our prior blog post.  Do not delay because the process will take some time and you don’t want the opportunity to limit exposure for your 403(b) plan to pass you by.

If your plan design does not lend itself to a pre-approved plan document and you intend to update your individually designed 403(b) plan document, you will still need to adopt any necessary amendments prior to the end of the remedial amendment period on 3/31/2020.