On December 11, 2008, the Internal Revenue Service (IRS) issued Notice 2009-3, which provides relief for sponsors of Internal Revenue Code Section 403(b) defined contribution retirement plans. In 2007, the U.S. Treasury Department finalized regulations applicable to 403(b) plans requiring a written plan document similar to the plan document requirement applicable to other tax-qualified retirement plans, such as 401(k) and profit sharing plans. For more information on the final 403(b) regulations, see McDermott’s On the Subject “Final 403(b) Regulations Offer Planning Opportunities and Some Surprises for Plan Sponsors.”
The IRS had previously indicated that each plan sponsor must adopt and implement its written plan document for plan years beginning on or after January 1, 2009. This requirement applies to both the Employee Retirement Income Security Act of 1974, as amended (ERISA), and non-ERISA plans. Consequently, plan sponsors without a plan document had attempted to develop the required plan documentation, while those with an existing plan document attempted to assure its compliance with the final 403(b) regulations.
Notice 2009-3 allows sponsors of 403(b) plans to adopt a written plan document effective as of January 1, 2009, so long as the plan sponsor adopts such plan document no later than December 31, 2009. The Notice also requires the plan sponsor to satisfy the two following requirements if it adopts a plan document after December 31, 2008:
- During 2009, the sponsor must operate its 403(b) plan in accordance with a reasonable interpretation of Section 403(b), particularly in light of the final regulations.
- Before the end of 2009, the plan sponsor must make its best efforts to retroactively correct any operational failure during the 2009 calendar year using principles parallel to those provided in the IRS’ employee plans compliance resolution system.
Note that this relief applies only to the 2009 calendar year, which implies that plan sponsors operating their plans on a basis other than a calendar year basis must adopt a plan no later than December 31, 2009, regardless of whether the end of the plan year occurs outside of 2009. This relief suggests that plan sponsors that have adopted either new or revised plan documents in anticipation of the new guidance can correct those documents in 2009. For plan sponsors that have not yet met the plan document requirement, the Notice allows them extra time to implement the plan document, provided that they otherwise make a good faith effort to comply with the final 403(b) regulations.