Effective date
While the effective date for compliance with the final 403(b) regulations is for tax years beginning after December 31, 2008, there are early effective dates pertaining to two areas: contract exchanges, (otherwise known as Rev. Ruling 90-24 Transfers), and life insurance contracts.

Contract exchanges (Rev. Ruling 90-24 Transfers): Currently, a 403(b) plan participant is permitted to transfer contract funds under an employer's
403(b) plan tax free to any other contract offered in the marketplace. Effective September 25, 2007, tax free Rev. Ruling 90-24 transfers and contract exchanges will be limited to providers with whom the employer has entered into an information sharing agreement by January 1, 2009, with receiving contracts to include distribution restrictions that are at least or more stringent than those of the transferring contract.

Life insurance contracts: Under the final 403(b) regulations, new life insurance contracts may not be entered into on or after September 24, 2007. Thus, 403(b) plan funds may not be invested in new separate life insurance contracts issued on or after September 24, 2007. Life insurance contracts issued before September 24, 2007, will be grandfathered if they satisfy the incidental benefit rules, which limit the total amount of participant 403(b) assets that may be invested in life insurance.

These examples detail only two of the changes resulting from the issuance of the final 403(b) regulations. There are significant additional rules included within the regulations to assist employers in planning and preparing for compliance.

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