The Internal Revenue Service has provided year-end relief to all employers, including School Districts, who sponsor 403(b) Plans.  Under previous regulations, employers were required to have a written Plan Document approved and in place by December 31, 2008.  IRS Notice 2009-3 released on December 11, 2008, extends that deadline to December 31, 2009, provided that the employer adopts a written Plan Document on or before that date and the Document satisfies all 403(b) requirements that were effective as of January 1, 2009.  Of course, if your District has already adopted a written Plan Document, the extension provided by the IRS does not apply.

 To qualify for the extension, the employer must:

  1. operate the 403(b) plan in accordance with a reasonable interpretation of applicable statutes and regulations;
  2. make “best efforts” during the 2009 calendar year to retroactively correct any previous failure to conform to requirements set forth in the 403(b) Plan Documents;
  3. corrections must be based on the general principles of corrections set forth in the IRS’s guidance in Revenue Procedure 2008-50;
  4. take all necessary steps to apply relevant IRS requirements to the 403(b) Plan during the 2009 calendar year; and
  5. correct past deficiencies, if any, in how the 403(b) plan is administered prior to December 31, 2009.

During the upcoming calendar year, the IRS will seek public comments on a revenue procedure to aid employers in obtaining approval of prototype 403(b) plans and establish a program through which employers can obtain a determination letter for individually-designed 403(b) plans.  The IRS also plans to make other changes to allow for retroactive remedial amendments of 403(b) plans for years following 2009.

Alfred C. Maiello
Alfred Maiello

Alfred C. Maiello is the founding member of MBM and has represented area school districts as solicitor for 50 years. He counsels school districts and educational institutions on leading developments in school law and guiding them through their day-to-day and long-term challenges.