Late Document

[Guest Catherine M. Peery]

What do you do when a new client comes along asking for a 403(b) document now, January 4, 2010? We kinda knew this would happen, and I'm wondering if we should go through a correction program, or have them sign it late or what.

We've decided to offer to help them with the VCP program. Part of that includes creating the new document, having it signed currently, and then submitting under VCP to get the correction approved. I'm hoping there will be a lot of understanding on the part of the DOL. This is a nonERISA plan.

[Below Ground]

I am unsure that with a Non-ERISA Plan you really have a problem that requires a VCP Filing. I would first get the documents signed ASAP. Then I would carefully review whether you even have a problem. I seem to recall that the restatement deadline was different for these types of sponsors. I will try to look this up, but you may want to contact your document vendor with this question. I know the vendor I use is "first rate" on issues like this.

[Peter Gulia]

If the employer's preference is to make available a 403(b) non-plan that is not governed by ERISA, the employer might want its lawyer's advice on:

(1) whether adopting a written plan could cause the employer to "establish" or "maintain" a plan, that then would (if not a governmental plan or church plan) be governed by ERISA;

(2) whether the employer's use of either government agency's correction procedure could suggest that the employer "maintains" the plan that is the subject of the correction.

[jpod]

Assume employer never had a 403(b) plan document, and blows the 12/31/09 deadline. Is it clear that you can use VCP to correct this error? This is not a failure to "amend;" it's a failure to "adopt."

[Guest Catherine M. Peery]

Several points. NonERISA have to have a document, and it has to comply with the 403(b) regs and with the latest PPA/HEART Act provisions. Yes, you can use VCP for this. If you correct within 1 year the fee is only $375, not so bad. See IRS Notice 2008-50. Its very clear that nonamenders and other document errors are covered.

The 403(b) regs specifically say that establishing a plan does not make a Plan ERISA, so non ERISA status is protected.

[John Feldt ERPA CPC QPA]

If they failed to adopt a restated/amended written 403(b) plan that covers the Final 403(b) regulations, before you submit under VCP, is the new written plan, as signed now, adopted with a retroactive effective date of 1-1-2009 or do you adopt the restated plan with a prospective date or 1-1-2010 date instead?

[Guest Serena]

I think the IRS is coming out with a 403b non amender program for document failures. You should wait for this to come out - should be this year.

[panther]

Rev. Proc. 2008-50 does not allow for correction of 403(b) plan document failures under VCP. The IRS is going to come out at some point with changes to the Rev. Proc. to allow more 403(b) corrections (See Notice 2009-3). Until then, there's no permitted way to correct 403(b) document failures from prior years.

[Kevin C]

You may want to take a look at the transcript of the 8/24/2010 IRS phone forum on EPCRS. The speaker addressed the failure of a 403(b) to timely adopt a plan document. He said to go ahead and fix it, don't wait for the new Rev. Proc.

The primary purpose of the expected update is to reflect the written plan requirement under the

final 403(b) regulations. The structure of the programs remains the same. What you’re familiar

with in 2008-50 largely will carry forward to the subsequent revenue procedure.There will be

some tweaks but the primary focus is to reflect the written plan requirement of the final 403(b)

regulation.

So what does that mean? Basically once we get the new revenue procedure we will be able to

address issues such as the failure to adopt the written plan by the end of 2009. And now that we

have a written plan requirement the plan in operation has to operate in accordance with plan

terms, so if you have a failure to operate the plan in accordance with plan terms you would be

able to address that under the new revenue procedure.

Other 403(b) failures can be addressed under the current revenue procedure. So the follow up

question you might ask is well, until that gets issued what should our approach be with respect to

employers that have the failure to adopt a written plan in a timely fashion? What I would

suggest is that if you know what the problem is and you know what the correction is, take that

action. Don’t wait on corrections until the program opens up. So, for example, if you have a

situation where you have an employer that hasn’t adopted a written plan program yet then adopt

it, have the employer adopt it. Don’t wait until the program opens up before that particular

action is taken.

The entire transcript is here:

http://www.irs.gov/pub/irs-tege/epcrs_phon..._transcript.pdf

The handout from the forum can be accessed from here:

http://www.irs.gov/retirement/article/0,,id=218995,00.html

[John Feldt ERPA CPC QPA]

Thanks. We also listened in on that forum, and we have already submitted the VCP application. By the time the IRS picks it up for review, perhaps a new Rev Proc will have been issued! 'will have been' is that present-past future tense?