The government has just extended the deadline for sponsors of 403(b) plans to adopt written plan documents (IRS Notice 2009-3). Because many employers have not yet met the documentation requirement, the IRS decided to delay the effective date of the requirement a year until January 1, 2010. Under the new guidance a tax-exempt institution’s 403(b) plan may still comply with regulatory requirements during 2009 even if it has not adopted a written document for its 403(b) plan by January 1, 2009. However, the plan sponsor must operate the plan during 2009 in accordance with a reasonable interpretation of the law and, before the end of 2009, must make its best efforts to correct retroactively any operational failures in the plan during 2009. A tax-exempt institution must also have its 403(b) plan document in place by January 1, 2010.  

The IRS also announced that it intends to create an approval process for 403(b) prototypes and provide determination letters for individually designed plans. Such a program would give assurance to institutions that their 403(b) plan documents comply with applicable law.  

While this relief has lessened the year end burdens for 2008, it does not take away the obligation of tax-exempt entities to put their 403(b) plans in writing and operate them in compliance with applicable law in 2009.