What's New

403(b) Mini-Courses
Presentations on operating 403(b) plans and how they work.

Proposed amendments to the regulations relating to certain cash or deferred arrangements and matching contributions under section 403(b) plans were published in the Federal Register. The proposed regulations would allow plans that incur substantial business hardship to reduce or suspend safe harbor nonelective contributions during a plan year.

A special edition of Employee Plans News contains a brief summary of the proposed amendments.

Announcement 2009-34
This announcement contains drafts of the revenue procedure and sample plan language for §403(b) prototype plans.

The draft revenue procedure explains the proposed 403(b) plan prototype program for issuing opinion letters and the sample plan language can be used to draft §403(b) prototype plans. Interested persons are invited to comment on the drafts of the revenue procedure and the sample plan language or any other aspect of the §403(b) prototype plan program. The IRS also requests entities that anticipate filing an opinion letter application as a §403(b) prototype plan sponsor send an email to ep.prototype.projections@irs.gov (mass submitters should send an estimate of the number of opinion letter applications it may seek for sponsors.) Also, read our Special Edition Newsletter article for additional information regarding the draft revenue procedure.

Notice 2009-3
This notice provides relief during 2009 for sponsors of §403(b) plans with respect to the requirement to have a written §403(b) plan in place by January 1, 2009. This notice also briefly describes other programs the Service intends to establish relating to §403(b) plans.

Revenue Procedure 2007-71
This revenue procedure provides model language that may be used by public schools either to adopt a written plan to reflect the requirements of the final 403(b) regulations or to amend its 403(b) plan.

Read our Special Edition newsletter describing the revenue procedure.

General Questions

Who can establish a 403(b) plan?

You are allowed to have a 403(b) plan if you are a:

• Public school, college or university or
• Charitable entity tax-exempt under section 501(c)(3) of the Code.

How do 403(b) plans work?

Basically, 403(b) plans are similar to 401(k) plans. Just as with a 401(k) plan, a 403(b) plan lets employees defer some of their salary. In this case, their deferred money goes to a 403(b) plan sponsored by the employer. This deferred money generally does not get taxed by the federal government or by most state governments until distributed.

What are the advantages of participating in a 403(b) plan?

There are significant tax advantages for participants in a 403(b) tax-sheltered annuity:

• Contributions to a 403(b) annuity are tax deferred,
• Earnings on the retirement money are tax deferred, and
• The annuity can be carried with the participant when he/she changes employers or retires.

See the most frequently asked questions and answers regarding:

• The effective date of the final regulations,
• The new written plan requirement,
• Effect the Final Regs. have on ERISA qualification,
• Terminating 403(b) plans,
• Universal availability and non-discrimination under the Final Regs.,
• Contributions to 403(b) Plans for former employees,
• Timing of deposits for elective deferrals, and
• Changes to old Rev. Rul. 90-24 on in-service transfers and exchanges.

Publications:

Pub. 4484, Choose a retirement plan for employees of tax-exempt and government entities (schools, hospitals, churches, charities)

Pub. 4483, 403(b) Tax-Sheltered Annuity Plan for Sponsor

Pub. 4482, 403(b) Tax-Sheltered Annuity for Participants

Pub. 4547, Have you had your check-up this year? for 403(b) Retirement Plans

Pub. 4546, 403(b) Plan Checklist

Pub. 4530, Designated Roth Accounts under a 401(k) or 403(b) Plan

Pub. 571, Tax-Sheltered Annuity Plans for Employees of Public Schools and Certain Tax-Exempt Organizations

Pub. 575, Pension and Annuity Income

Pub. 15, Circular E, Employer’s Tax Guide

Resources:

Guidance:

403(b) Final Regulations
(released July 24, 2007)

Published July 26, 2007 in the Federal Register, with a general effective date of taxable years beginning after December 31, 2008, these regulations encompass the changes made by legislation from the past 43 years. By diminishing the extent 403(b) plans differ from other salary reduction arrangements (401(k) and 457(b)), administration of 403(b) plans will be simpler, which should lead to increased compliance.

Overview

Index to 403(b) Regulations

News Articles

Presentations

Additional Resources

Related Guidance:

Correcting Plan Errors

409A Regulations & Guidance,
Non-qualified Deferred Compensation Arrangements – 10 vs. 12-month pay elections

Rev Proc 2007-71, Model Plan Language

Notice 2007-7, Q&As Relating to Recent Legislation

Final 415 Regulations

Notice 2005-5, Automatic Rollover

Rev Rul 2004-12, Rollovers to Eligible Retirement Plans

Rev Rul 2001-51, EGTRRA Changes to IRC 415 Requirements

Announcement 2001-106, Tax Credit for Retirement Plan Contributions for Low-Income Savers

Notice 2001-56 , EGTRRA Changes to Compensation Limits

IRC 501(c)(3)

FAQs: Sec. 409A and Deferred Compensation

Prior Law Guidance

EP Exam will be reviewing 403(b) plans under pre-regulation guidance and interpretation for years before 2009.

Rev. Rul. 2009-18, 2009-27 I.R.B. 1
The revenue ruling notes that a number of guidance documents had become outdated due to numerous intervening statutory revisions enacted in section 403(b). Final regulations under sections 1.403(b)-1 thru 11 have been issued. Since these regulations include and modify much of the IRS guidance relating to section 403(b) issued between 1964 and 2004, the guidance documents listed in the revenue ruling are obsoleted or superseded in their entirety, with one partial exception
(Notice 89-23).

Exam Guidelines

I.T. Reg. 1.403(b)-1
I.T. Reg. 1.403(b)-2

Additional Resources:

The IRS Retirement Plans Navigator - a retirement plan Web guide for small employers.

Retirement Plans FAQs Regarding Automatic Contribution Arrangements (Automatic Enrollment Arrangements)