Upcoming Changes to 403(b) Plans Require Foresight—Don’t Risk Noncompliance
Organizations need to begin preparing to ensure compliance with the first major regulation changes to 403(b) plans in four decades. They generally become effective on January 1, 2009. Revisions to the Form 5500 filing requirements also go into effect at the same time—making certain
403(b) plans subject to an audit—similar to 401(k) plans.
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403(b) plan regulation changes
On July 26, 2007, the United States Treasury Department released
final regulations for tax-sheltered retirement plans under Internal Revenue Code (IRC) 403(b). The final rules diminish the extent to which 403(b) plans differ from
401(a) qualified plans.
The revised regulations apply to all types of 403(b) plans including plans that have only employee salary deferral contributions. These are the first major revisions in more than 40 years, and they generally become effective on January 1, 2009 (excluding the early effective dates for contract exchanges and life insurance contracts). Early adoption of the regulations is permitted.
Revisions to Form 5500
In addition, on November 16, 2007, the Department of Labor released revisions to the Form 5500 filing requirements for 403(b) plans. These revisions are effective for plan years beginning on or after January 1, 2009.
The changes contain, among other items, the provision that 403(b) pension plans subject to Title I will now be treated the same as any other Title I pension plan—for the purposes of the annual reporting requirements under Title I of the Employee Retirement Income Security Act of 1974 (ERISA).
This means certain 403(b) plans may now be subject to an audit, similar to 401(k) plans.
What you can do to prepare for these upcoming changes
- Gain an understanding of the major regulation changes affecting the following areas to ensure compliance:
- Written plan requirement
- Contribution limitations
- Nondiscrimination rules
- Distributions and transfers
- Funding
- Obtain an understanding of systems and process implementation to accommodate compliance
- Put a team of people in place to be accountable for your plan’s compliance
- Determine if your plan requires an annual financial statement audit
- Begin gathering the information necessary for the audit
How LarsonAllen can help
LarsonAllen’s benefit services team is made up of dedicated professionals who spend 100 percent of their time serving the needs of plan sponsors.
We can help you understand your responsibilities to comply with the final regulation changes to 403(b) plans and determine whether your plan will be subject to an independent audit.
Through seminars, LarsonAllen professionals will give plan sponsors tips on how to prepare for 403(b) regulatory compliance and reporting.
For more information, contact us or learn about our 403(b) consulting, compliance, and assurance services.