403(b) and EGTRRA

[Guest Donaldson]

Does anyone know whether 403(B) plans are subject to the deadline for adopting the model EGTRRA amendments by the end of their plan year beginning in 2002 (meaning 12/31/02 for calendar year plans)? Thank you.

[mbozek]

While 403(B) plans are required to be administered in accordance with the law there is no requirement that the plan be amended to conform to changes in the law because a 403(B) plan is not required to be administered in accordance with its terms. Only qualified plans can lose their tax exempt status if they are not amended by the end of the remedial amendment period.

[Guest Donaldson]

Thank you very much.

[MWeddell]

403(B) plans that are subject to ERISA (primarily those plans that have employer contributions, not just elective deferrals) are required to have written plan documents and be administered in accordance with their documents. However, unlike the IRS, the DOL doesn't declare precisely when EGTRRA amendments must be made before it considers a plan as violating ERISA because it's not administered according to its plan document.

[mbozek]

Dol has no program for reviewing plan documents. Under ERISA a plan must be administered in accordance with its terms to the extent plan is consistent with title I of ERISA. The DOL has no jursidiction over enforcing tax law changes. I am trying to determine what would be the DOL sanction if a plan is administered in accordance with the current IRS requirements instead of its terms, e.g., plan applies final 401(a) (9) regs or provides for contributions based on EGTrra changes instaed of plan document provisions. If the failure to conform to language changes causes no harm to plan participants or actually benefits them I dont see harm to the plan participants. I dont think the DOL would require that the excess contributions be removed from the participants accounts. Some 403(B) plan providers/vendors are slow in making amendments and some employers are little slow in adopting amendments.

[MWeddell]

ERISA Section 402(a)(1) requires plans to be maintained pursuant to a written instrument. If the plan is never amended for EGTRRA but the plan is administered in compliance with EGTRRA, eventually the DOL might find that one has violated 402(a)(1). I agree that enforcement of this is very lax, so the difference of opinion between my posts and mbozek's may be less than it first appears.

[Guest Donaldson]

Thank you mbozek and MWeddell for taking the time to give me your opinions. I have learned a great deal. Thank you.