Many colleges and universities provide retirement benefits through a 403(b) plan. The IRS has set a deadline of March 31, 2020 for 403(b) plans to be restated on IRS pre-approved documents if the plan sponsor wishes to gain assurance that its plan document provisions retroactively meet IRS requirements.

Background

In 2007, the IRS issued final regulations requiring a 403(b) plan to be maintained pursuant to a formal plan document reflecting Internal Revenue Code provisions, beginning January 1, 2009. (Later guidance delayed the plan document requirement to December 31, 2009.) Before that time, there was no specific IRS requirement to have a formal plan document reflecting Internal Revenue Code provisions. (403(b) plans maintained by private, non-governmental colleges and universities were required by ERISA to have plan documents.) Since 2009, 403(b) plan sponsors have used non-IRS-approved plan documents provided by recordkeepers, third-party administrators, and/or legal counsel.

IRS Pre-Approved 403(b) Plan Documents

In 2013, the IRS announced a pre-approval program for 403(b) plan documents that would operate in a manner similar to that of long-standing IRS pre-approval programs for tax-qualified plans, such as 401(k) plans. Many recordkeepers and third-party administrators now offer IRS pre-approved 403(b) plan documents and have been working with their plan sponsor clients to restate their plans.

Retroactive Reliance on Pre-Approved Plan Document Terms

Under general IRS principles, a plan amendment may not be effective earlier than the first day of the plan year in which the amendment is adopted. In contrast, the current window for amending and restating 403(b) plans offers the ability to retroactively amend and restate the plan to a date as early as January 1, 2010 and obtain reliance, back to the amending restatement date, that the plan's terms meet IRS requirements under Section 403(b). However, the restatement must accurately reflect all plan terms, as amended, including their effective dates, going back to the restatement effective date. This can present a practical challenge to using an early restatement effective date, because of the constraints of an IRS pre-approved plan document.