Availability of self correction for 403(b) plans/programs.

[Guest Grumpy455]

Self correction (under Rev. Proc. 2003-44) is available only for Operational Failures. Operational failures are Qualification Failures arising solely from the failure to follow plan provisions. 403(b) plans are not subject to the requirement of a definite written program (although ERISA requires a written plan document for some 403(b) plans--this requirement is not applicable in this particular situation).

In the case of a qualified plan, it is generally easy to locate the "plan provisions" and also to determine whether or not a situation involves a "qualification failure". In the case of a 403(b) plan, or at least the one I have in mind, it seems much less clear. In my case, there is an SPD, no formal plan document, and the custodial agreement. The SPD says X, but the client has been doing Y. The custodial agreement is silent on the matter. The 403(b) plan can do X or Y without jeopardizing its "qualified status", i.e., without violating Section 403(b).

I am not sure what to do. Are the "plan provisions" referred to in the IRS self correction provisions contained in the SPD, the custodial agreement, the combined SPD/custodial agreement? Since the SPD is technically a summary of the plan, it makes logical sense that the SPD is not the plan. Also, since doing X or Y does not jeopardize the 403(b) plan's qualified status, is this truly a Qualification Failure?

Any thoughts would be helpful as I try to figure out what to do next. Thanks, in advance, for any help.

[mbozek]

Whout knowing what is the provision that you think has been violated there is not much can be said. Only thing that come to mind is that 403b contributions are separately subject to the IRS requirements on an annual basis. The s/l for collecting taxes from the employee is generally 3 years from the year the contribution is made. If the plan is corrected in 05 the s/l for collecting taxes on plan contributions expires no later than 4/15/08.

[Guest Grumpy455]

Is it common for a 403(b) plan document to simply be the SPD?

[mbozek]

If the plan is exempt from ERISA there is no requirement that there be a written document. The plan could be limited to the salary reduction agreement and the annuity contract or custodial agreement. Plan could have an SPD which could double as the plan document.