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Important Deadline for 403(b) Plan Sponsor
Clients
DO
YOU WORK
with 403(b) plans for churches, schools, hospitals, or
other not-for-profit organizations? If you answered yes,
then you need to keep reading. New regulations and new
reporting requirements for all 403(b) plans will take
effect on January 1, 2009. Plan sponsors will be
affected by two significant issues as a result of these
requirements. A written plan document will be required
as well as the filing of a full Form 5500. Both of these
new requirements require action by plan sponsors now in
order to meet the 1/1/2009 effective date.
Written plan document
All
403(b) plans, including those exempt from ERISA, must be
operated in accordance with a written plan document that
contains all material terms and conditions for
eligibility, benefits, applicable limitations, the
contracts available under the plan, and the time and
form under which benefit distributions will be made.
Plan documents that meet these requirements must be
adopted no later than December 31, 2008. This will be a
drastic change for many plans since prior to this
regulation they were not subject to the extensive formal
plan document requirements that have always applied to
401(k) and 401(a) plans.
Full
5500 filing requirements
Starting with plan years beginning in 2009, all ERISA
403(b) plans must file the full 5500 return. If the plan
has 100 or more eligible participants, it must also
comply with the 5500 return’s annual audit requirement.
Gathering information for the 2009 Form 5500 will be a
significant challenge for many plan sponsors. In the
past, financial institutions holding 403(b) plan assets
often did not have a contractual obligation to report
plan asset or participant account information to the
employer/plan sponsor.
Work
on the first full 5500 returns will begin in 2010, but
plan sponsors should prepare by talking to the financial
institutions now about gaining access to the necessary
plan asset and participant account information by the
first day of the 2009 plan year. Plans subject to the
5500 audit requirement will have the additional
challenge of gathering sufficient information to satisfy
auditors in a situation where there has been very little
plan asset information available in earlier years.
By
working with an experienced Third Party Administrator
you can help your clients prepare for these changes.
Your client will most likely need help with preparing a
formal plan document, even when the plan is a non-ERISA
salary deferral only 403(b) plan. Sponsors of 403(b)
plans that include an employer-funded contribution will
also need assistance with creative plan design options,
annual compliance testing, preparation of Form 5500, and
possible correction of prior operational errors.
Click
here to learn more about the regulations affecting
403(b) plans.
Click
here to visit our advisor toolbox.
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