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IRS Issues Final 403(b) Regulations
By Brenda J. DeCosta
The regulation of 403(b) plans has been somewhat informal in the past. There are numerous new rules which now move the regulation of 403(b) plans onto a similar level with 401(k) plans. Since many workers rely on their 403(b) or 401(k) plans for most of their retirement income, protecting the assets in the plan is a key reason behind these new regulations.
The Internal Revenue Service (IRS) recently issued final regulations relating to annual reporting and disclosure requirements under Part 1 of Subtitle B of Title 1 of the Employer Retirement Income Security Act of 1974, as amended (ERISA). The regulations impact all 403(b) plans offered by tax-exempt organizations, except for those offered by government and religious organizations. All of these plans will now need to have a written plan document. This requirement even applies to plans over which the employer has no control, such as a salary reduction-only plan. Thus, plan sponsors must now draft a plan document that outlines all of the vendor contracts, participant's rights under the plan, and administrative responsibilities, including who is responsible for complying with the 403(b) rules.
In addition to the IRS changes, the Department of Labor (DOL) has also increased the reporting requirements of all 403(b) plans which fall under its jurisdiction. All 403(b) plans subject to ERISA and which currently file a Form 5500 will continue to do so. In addition, these plans will have much more extensive reporting requirements, and all plans with over 100 participants will be required to submit audited financial statements with the Form 5500.
So, what do you need to do now? First, gather all of the documents related to your 403(b) plan. This would include such items as vendor agreements, contracts, custodial agreements, personnel policies, and summary plan descriptions. The next step would be to summarize the terms, eligibility requirements and administration procedures. In some instances, your vendors may have prototype or master plans available to utilize. Also, if your plan is currently exempt from the ERISA rules, you may want to discuss with legal counsel if you will continue to be exempt after completing the plan document.
The new rules are effective for years beginning after December 31, 2008.
Parent, McLaughlin and Nangle, CPA's currently provides audit and tax services for approximately 80 employee benefit plans. For more information, please contact James Kennedy (jkennedy@pmn.com), Judy Javidpour (jjavidpour@pmn.com) or Brenda DeCosta (bdecosta@pmn.com) 617(426)9440.
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