The IRS recently issued Notice 2009-3, which provides relief with respect to the written plan document requirement for sponsors of Internal Revenue Code § 403(b) tax-sheltered annuity plans (also known as 403(b) annuities, or tax-deferred annuities). Before the relief, sponsors of 403(b) Plans were required to have a written plan document that satisfied the final regulations under § 403(b) in place by January 1, 2009. The relief effectively gives plan sponsors an additional 12 months to meet the requirement.
There is no relief granted from operational compliance with the final regulations under Code Section 403(b), meaning that 403(b) Plans must be operationally compliant during all of 2009.
Requirements for Relief
Relief from the January 1, 2009, deadline for the written plan document is not automatic. In order to qualify for the relief, a 403(b) Plan must do the following:
- on or before December 31, 2009, the sponsor must adopt a written 403(b) Plan that is intended to be compliant with the final 403(b) regulations;
- during 2009, the sponsor must operate its 403(b) Plan in accordance with a reasonable interpretation of Code § 403(b) and the Regulations; and
- by December 31, 2009, the sponsor must use its “best efforts” to retroactively correct any operational failure during the 2009 calendar year to conform to the terms of the written 403(b) Plan. Any such corrections should be based on the general principles set forth in the Employee Plans Compliance Resolution System (EPCRS) in Revenue Procedure 2008-50.
Establishment of Prototype and Determination Letter Programs
The IRS also announced in Notice 2009-3 that it will establish a program for prototype 403(b) Plans and will publish sample language that may be relied on for purposes of drafting prototype 403(b) Plan documents. Once the prototype program is up and running, the IRS intends to establish a determination letter program for individually designed plans as well. The IRS announced that both the prototype program and the determination letter program for individually designed plans will provide for a retroactive remedial amendment of 403(b) Plans for years after 2009.