LRMs for 403(b)

[Guest Penelope]

The IRS has published draft LRMs for 403(b) plans on its website. Here's the URL:

http://www.irs.gov/retirement/article/0,,id=97182,00.html

Apparently the LRMs were included in Announcement 2009-34, but I couldn't find that on the IRS site.

[Guest Joseph Zavoda]

IRS Announcement 2009-34 and yesterday's IRS teleconference concerning 403(b) plans raise a number of issues for 403(b) plan sponsors and providers. A major issue is that the proposed prototype program for 403(b) plans will not be available for plans with vesting schedules and prototype plans cannot contain provisions applicable to churches and organizations described in IRC Sec. 3121(w)(3).

The guidance also states that if the plan document conflicts with the terms of the annuity contracts or custodial agreement used by the plan the terms of the plan control. Moreover, by the end of 2009, plans must adopt plan documents and be in operational compliance by year end. The guidance also requires that to take advantage of the transitional relief, plan sponsors must make their best efforts to retroactively correct any operational failures to conform plan operations to the written plan using the IRS Employee Plans Compliance Resolution System principles.

All of this means that plan sponsors need to take a close look at their plan and how it operates by year end to avoid serious compliance issues and the potential loss of favorable tax treatment for their plan or their plan participants.

Joseph Zavoda

President

403b Plan Services LLC

293 SR-18, Suite C #318

East Brunswick, NJ 08816

(732) 353-6841

403bplanservices.com