On December 11, 2008, IRS Notice 2009-3 extended the deadline for 403(b) plan sponsors to adopt new written plans or amend existing plans to satisfy the requirement of the final 403(b) regulations because of difficulties expressed by numerous plan administrators in meeting the original deadline of January 1, 2009. This extension gave 403(b) plan sponsors an additional year in which to put their 403(b) plan documents in place.  

As a result of the extension and coupled with the new legal requirement to have a written 403(b) plan document, there has been a surge of service providers offering services whereby they are willing to assume the role of plan administrators for 403(b) plan sponsors with respect to their 403(b) plans under the new regulations. This is a role with which the majority of 403(b) plan sponsors previously never needed to be concerned. The typical 403(b) package offered by service providers includes a written plan document modeled from the IRS model 403(b) plan for public schools which was issued in IRS Revenue Procedure 2007-71.  

Please note that the model 403(b) plans provided by any third-party administrator service provider have been reviewed by the service provider’s legal counsel for the protection of the service provider. They may not have been reviewed by legal counsel for the protection and benefit of the 403(b) plan sponsor and its participants. Consequently, in particular where a current 403(b) plan has more than one annuity contract or custodial contract provider, we recommend that you have your own legal counsel review the 403(b) plan provided to ensure it is both legally compliant with the 403(b) regulations, and that it also protects the future interests of the company and plan participants as these plans become more regulated.  

We have been reviewing the model 403(b) plans offered by various service providers and advising tax-exempt organizations on how to tailor these arrangements given their current annuity contracts and custodial accounts. We can highlight necessary revisions to the language provided to you as well as provide clarity on how the administration of the 403(b) plan should work going forward. In the majority of situations, we are helping tax-exempt organizations understand what their new legal responsibilities are and then effectively and legally moving those responsibilities to third parties who are better equipped to handle them going forward. Additionally, we have assisted many of our clients in consolidating their annuity contract and custodial account vendors at the same time to offer a tighter investment platform and streamline the administration process. To ensure your organization’s interests are protected, we strongly recommend that you have your employee benefits legal counsel review any “template” 403(b) plan provided to you for signature.