SBJPA Amendment Deadline

[Christine Roberts]

My understanding is that Rev. Proc. 99-23, 1999-16 I.R.B. 5, did not extend the SBJPA amendment deadline of 12-31-98 (or end of 1998 plan year, if later) applicable to 403(b)plans. Any comments on options for plans that did not meet the amendment deadlines?

[Note: This message has been edited by CVCalhoun]

[Christine Roberts]

By way of explanation, this plan is set up on a profit sharing prototype due to discretionary employer contributions. As examples of needed amendments, the definition of HCE, repeal of family aggregation, $5,000 cash out limit . . I am not familiar with an amendment exemption based on method of funding. What is the source?

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[This message has been edited by Christine Roberts (edited 07-19-99).]

[Everett Moreland]

The plan document may not need to be amended if the plan is funded with individual annuity contracts or custodial accounts. I don't recall all the 403(B) provisions in the '96 act. What specific provision are you concerned about?

[Everett Moreland]

The $5,000 cash-out limit in the IRC does not apply to a 403(B).

A 403(B) generally does not have to pass the nondiscrimination tests in form, only in operation, so generally it is not a problem if the document uses the old HCE definition or family aggregation.

The reason the funding source could make a difference is the provision in 403(B)(1)(E) (added in 1996) requiring the annuity contract or custodial account to meet the requirements of 401(a)(30). Most, if not all, individual annuity contracts and custodial accounts have long included the 401(a)(30) limit in them.

[MWeddell]

First of all, the IRS deadline for amending 403(B) plans and contracts was the first day of the 1998 plan year. See IRS Revenue Procedure 97-41, Sections 1.02(4) and 12. It's not been extended since then.

However, the real answer is that there isn't any IRS requirement that there be a written plan document in the first place. That's why the IRS didn't bother extending the deadline because there wasn't any deadline (and because Code Section 401(B)'s remedial amendment period doesn't apply to 403(B) programs). Bob Architect of the IRS could informally confirm this enforcement position if you want to talk to someone there (no, I don't have his number handy).

Theoretically, if your plan is subject to ERISA, the DOL could say that the document should have been timely amended, but that's not going to happen.

In sum, I don't think you have to worry about it. Just make the amendments now.

[This message has been edited by MWeddell (edited 07-21-99).]

[Everett Moreland]

Plans funded with individually designed group custodial contracts did need to be amended by the SBJPA amendment deadline to comply with the change to 403(B)(1)(E).

[MWeddell]

I disagree with the above post and still see nothing in the Internal Revenue Code nor the IRS regulations and guidance that requires a written plan document for a 403(B) plan.

Code Section 403(B)(1)(E), as amended by the SBJPA, required that the contract be amended by 1/1/1998, not the plan. See also Rev. Proc. 97-41, Sections 12.02, 1.02(4), and 2.02.

[Everett Moreland]

I agree. My prior comment intended to include the custodial account within the concept of the plan, as the question related to whether amendments were required by the SBJPA deadline for 403(B) plans. Although it is technically correct to state that no amendment was required to the plan document, it is not helpful and is misleading to imply that no amendment was required by the deadline to keep 403(B) plans qualified.

[Christine Roberts]

Thanks for all the helpful comments. What appears to be your collective answer is as follows:

1. Provided that the annuity contract or custodial account has been amended, effective 1/1/98, to comply with SBJPA '96, specifically the provision in sec. 403(B)(1)(E), no plan document amendment is needed, per the IRS.

2. The DOL could possibly require plan document amendment but this is not likely.

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