Consequence of Missed Restatement Date

[Patricia Neal Jensen]

Anyone have information on the consequences of a plan sponsor failing to get the 403(b) plan restated by March 31?

Thanks!

PNJ

[Carol V. Calhoun]

If not corrected, this could lead to employees being taxed on all contributions to the plan when they become vested, and rollover treatment being unavailable on distributions.  In the case of a 403(b) custodial account (as opposed to a 403(b) annuity), it could lead to the custodial account becoming tax-exempt.

To avoid this, the failure can be corrected under VCP (but not SCP).  Rev. Proc. 2019-19.

[Patricia Neal Jensen]

Thanks, Carol.  I have seen some old charts for 401(k) restatements which show sliding scales of cost for the VCP submission depending on how far after the deadline the correction occurs.  It is probably too soon to hope for such a thing for 403(b) but we are still getting plans which need to meet the deadline which now is only 2 weeks away!  I am anticipating plans coming for help after the deadline and hoping to be able to give them as much information as possible.  I will review the information in the Rev. Proc. and also speak with some attorneys we use in such situations.   

Thank you again.  Hope this finds you well and that you stay that way!

Patricia

[Belgarath]

I also am hoping for a little relief of some sort - perhaps a streamlined and inexpensive VCP filing for the next year, etc.similar to what was done in the past - this is particularly true for schools. Yes, they have had 2 years to adopt updated plans, but human nature is such that too many of them have waited until the last minute, and with schools all over the nation now shut down due to the Corona virus, they have far more important things to worry about, and there will be a lot of missed deadlines.

[BK55]

Agree, it would be helpful to not put hospitals in a position of dividing their attention right now. Relief in a few weeks won't avoid that.

 

[G8Rs]

A request has been made to extend the deadline for a year. Needless to say, their plates are full with countless critical issues that need to be addressed. But It would be shocking if they didn’t provide relief.