In July 2007, the Treasury released the final 403(b) Regulations providing updated and much needed guidance on annuity contracts offered under Section 403(b). The basic gist of the new regulations is to bring the rules governing the administration of 403(b) plans to be more in agreement with those governing the administration of Section 401(k) plans. The two most significant changes required under the regulations are the requirement of a written plan document and the curtailment of open-ended contract to contract transfers.
In order for 403(b) plans to be in compliance with the new regulations, plan sponsors will need to be sure that the plan is in writing. The IRS has announced that they will be providing a sample 403(b) plan document that may be useful to plan administrators in drafting written plan documents. Unfortunately, the sample plan document is not yet available, but plan sponsors will have until 2009 to have a written plan document in place. Specific items that need to be addressed in the written plan document include participant eligibility, plan contributions, applicable limitations, contracts available, and the time/form of plan distributions. Optional items that may be addressed, but are not required include the treatment of plan loans, hardship distributions, rollovers, and the delegation of responsibility for plan administration.
The curtailment of open-ended contract to contract transfers is the other significant change under the new regulations. Under the new regulations, transfers to other plan types, such as a 401(k) or a 457 are no longer permitted. Under the new regulations, transfers may only be made to and be received from other 403(b) plans.
There are no questions pertaining to the administration of a Section 403(b) annuity plan on the 2008 core Form 990, however, public charities filing Schedule A for tax years 2007 and before were asked if a 403 (b) annuity plan was in effect (Part III question 3b). Given the above changes, public charities with a 403(b) plan need to be aware of the new regulations and how they might affect the administration of their plans.
Comments