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 firstname.lastname@example.org (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.
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. It also provides transitional relief for contracts or custodial accounts that were issued or exchanged under Rev. Rul. 90-24 before January 1, 2009.
Read our Special Edition newsletter describing the revenue procedure.
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.
Ask Bob Architect!!!
Bob Architect, Senior Tax Law Specialist and the resident expert on 403(b) plans, receives many questions while presenting the latest 403(b) Information to organizations. See the most frequently asked questions and Bob’s 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.
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
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.
Index to 403(b) Final Regulations
409A Regulations & Guidance,
Non-qualified Deferred Compensation Arrangements – 10 vs. 12-month pay elections
Rev Proc 2007-71, Model Plan Language
Notice 2007-7, Pension Protection Act Guidance
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
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.
I.T. Reg. 1.403(b)-1
I.T. Reg. 1.403(b)-2
Correcting Plan Errors