Deadlines are fast approaching for a number of changes required as to retirement plans, including plans under Section 403(b) of the Internal Revenue Code. This is a good time to focus upon such upcoming deadlines so that plan sponsors may complete any required amendments and take any other necessary actions by the pertinent deadline. This Alert contains a summary of those deadline requirements.
Pre-approved plans (volume submitter and prototype) must be restated every six years. Individually designed plans must be rewritten every five years based on a revolving schedule using the last digit of the employer's federal tax identification number. Currently, individually designed plans (including all ESOPs) for which the sponsoring employer's identification number ends in 4 or 9 must be restated no later than January 31, 2010. If a "determination" (i.e., approval) letter will be requested, the determination letter application, generally, must also be mailed by January 31, 2010. All pre-approved plans, regardless of the sponsoring employer’s identification number, must be restated no later than April 30, 2010. Pre-approved plans generally afford the employer automatic reliance on approval by the Internal Revenue Service of the plan format, and normally do not need to be submitted to the IRS for an individual determination letter.
There are several interim amendments that must be adopted by all qualified plans, whether or not a 2009 restatement is required. These amendments include:
Section 415 Amendment. This is an amendment primarily to bring plans into compliance with the new definition of "compensation" under Section 415 of the Code. The deadline for this amendment varies, depending on the plan's year end, but for most calendar year plans the deadline is September 15, 2009.
PPA Amendment. This amendment is required to incorporate changes in the Code brought about by the Pension Protection Act (PPA) of 2006, including faster required funding for defined benefit plans and the authorization of certain non-spouse beneficiaries to roll over distributions from qualified plans. Other technical changes are required or permitted. The deadline for adopting a PPA amendment is generally December 31, 2009. Employers with restatement deadlines after December 31, 2009 may either adopt a PPA amendment by year end and then include the amendment's provisions in the subsequent restatement, or accelerate the restatement of the plan to a date no later than December 31.
HEART Act Amendment. The Heroes Earnings Assistance and Relief Tax Act of 2008 (“HEART Act”) requires plans to assume that employees who die while performing qualified military service had resumed employment on the day before their death for death benefit purposes, such as accelerated vesting and special or increased benefits triggered by death. Plans under Section 401(k) and other elective contribution plans must allow participants who are on active military duty for more than 30 days (and who are receiving wage differentiation payments) to withdraw their contributions, subject to the 10% penalty for pre-59½ distributions, and subject to a six month post-withdrawal suspension of contributions. A similar rule voluntarily applies to qualified reservists who are called to active duty for more than 179 days (or indefinitely), but qualified reservists are exempted from the 10% penalty for distributions made while they are on active duty. While HEART Act amendments must be adopted by the end of the 2010 plan year, it seems more efficient for these amendments to be addressed with the restatement of plans that must be restated in the current cycle.
Section 403(b) Plan Documents. Sponsors of Section 403 (b) plans must have a plan document in place by the end of 2009, and those sponsors whose plans have more than 100 participants must have made arrangements to have the plan audited as part of the new reporting rules.