Boris Benic and Associates LLP - Certified Public Accountants and Consultants - Garden City, Long Island, New York

Boris Benic and Associates LLP - Certified Public Accountants and Consultants - Garden City, Long Island, New York

   
Resources - Tax Center - Boris Benic and Associates LLP - Certified Public Accountants and Consultants - Garden City, Long Island, New York
     
 

IRS Issues New 403(b) Plan Guidance

 
 

Does your tax exempt organization offer a 403(b) retirement plan? Are you considering establishing such a plan for your employees? If so, then you will be interested to learn about recent changes the IRS issued (Revenue Procedure 2013-22) which make the establishment and administration of 403(b) plans easier. Many challenges arose for tax exempt entities sponsoring these plans in 2009, when the IRS changed the regulations regarding plan administration. A key change that presented challenges for many organizations was the plan documentation requirement. Plan sponsors were required to submit written plan documentation but many had kept informal documentation and were unsure how to meet this requirement. As a result, many plans did not properly comply with this requirement. To address this problem, the IRS issued the latest guidance to provide a path to compliance for 403(b) plan sponsors.

 

Prototype Plan Program

To address plan documentation issues the IRS created a prototype plan program for 403(b) plans. The program offers pre-approved plan details including sample plan documentation and an adoption agreement which allows customization to include desired plan features. This is similar to what has been done with qualified plans for many years. As part of the program, any company adopting a pre-approved plan will be able to receive an IRS opinion/advisory letters stating the plan complies with applicable 403(b) plan regulations.

 

Key Aspects of the New Program

Although the new program offers many benefits there are some items that should be considered. These include:

  • Limited Advisory/Opinion Letters – The IRS will only issue opinion/advisory letters for employers using the pre-approved plan program. Unfortunately, applications for determination letters on plans designed under other means will not be accepted or considered. (The IRS has indicated they have no intention of creating a separate determination program for 403(b) plans). Plan sponsors interested in receiving confirmation on compliance from the IRS will need to use the pre-approved plan program and submit their application between June 28, 2013 and April 30, 2014.

  • Amendment Period – Plan sponsors will be given an amendment period to address deficiencies in their plan documents to bring them in compliance with regulations. Additionally, employers sponsoring individually designed plan can correct any issues by adopting new plan amendments or simply transitioning to a pre-approved plan format. This represents an important opportunity for many to correct issues in their documentation and come into compliance with IRS regulations.

  • Investment Arrangements – This is a new requirement for 403(b) plans over prior years. Plans will now be required to include investment information and provide detailed information on plan control in the event of a conflict. This is an essential part of the documentation process as investment arrangements are considered more important than plan documentation.

  • Vesting Schedule – Vesting schedules were not impacted by the new guidance. This means that plan sponsors will be able to outline vesting limits to employer contributions based on the individual employee’s years of service and other such criteria.

  • Sample Plan Language – As part of the new guidance the IRS has developed a resource center where sponsors may go for access to additional resources. Included as part of this is a link to sample plan documents including plan language that can be used by sponsors when compiling plan documents. This is also a nice resource for sponsors with individually designed plans because they can compare existing plan language and make changes as needed.

Moving Forward

It’s important to carefully consider your plan structure and needs before making any changes to your 403(b) plan. While recent changes make plan documentation and administration much easier it may not be necessary to make a wholesale change. As a result, Boris Benic & Associates LLP encourages you to consult with a plan professional prior to making any plan changes.

 

Contact Us

Are you unsure how these new rules will impact your situation? Wondering if you should convert to a prototype plan? For additional information on the new IRS guidance please contact Robert Puerto, CPA, at 516-248-7361, or click here to email Robert. In a brief consultation he can assess your situation and determine the best way to proceed.

 

Source: AICPA

 

 
 

Boris Benic and Associates LLP - Certified Public Accountants and Consultants - Garden City, Long Island, New York

 

Boris Benic and Associates LLP - Certified Public Accountants and Consultants - Garden City, Long Island, New York