The United States Internal Revenue Service (the “IRS”) has released Revenue Procedure 2019-39, which sets forth a March 31, 2020 deadline by which tax-qualified 403(b) plans must have plan documents that fully comply with the 403(b) requirements. A 403(b) plan is a tax-qualified defined contribution retirement plan that is similar to a 401(k) plan, but that is sponsored by a public school district or a tax-exempt entity.
The March 31, 2020 deadline represents the end of the “remedial amendment period” under which 403(b) plan sponsors may self-correct plan provisions that violate the Internal Revenue Code 403(b) written plan rules by adopting plan amendments by March 31, 2020. To take advantage of the remedial amendment period, the plan sponsor must have adopted a written 403(b) plan by December 31, 2009 (or the effective date of the plan, if later). However, following March 31, 2020, 403(b) plans will follow rules similar to those that apply to 401(k) plans and pension plans and will be permitted to be corrected through the Employee Plans Compliance Resolution System (“EPCRS”), under which many plan document defects require a formal submission to the IRS and the payment of a user fee.
To keep up to date on the IRS form requirements, the IRS publishes an annual Required Amendments List in the fourth quarter of each year and describes any amendments that are required for plan documents to comply with legal and regulatory changes. The IRS also publishes its Operational Compliance List to aid plan sponsors in spotting operational issues that need to get integrated into plan documents.
Keeping tax-qualified retirement plans up to date with legal and regulatory changes is technical in nature and we frequently assist plan sponsors of 401(k), 403(b), 457(b), and pension plans with reviews of the Required Amendments List and the Operational Compliance List in order to make sure plan documents are fully compliant and updated for law.
We continue to come across 403(b) plans that either do not have formal plan documents or that have not been properly updated for legal or operational changes. We are working with those clients to assist in drafting plan documents and/or working with their plan recordkeepers to get those plans into compliance in advance of the March 31, 2020 deadline.