403(b) Summit: The "Other" IRS Plan Regs

May 6, 2009 (PLANSPONSOR.com) - Having a written plan document and tightening of controls over a 403(b) plan's investment option selection may have gotten a good deal of attention in recent months, but there are more regulatory items to which sponsors need to pay attention.

That’s what attendees at a discussion group held as part of PLANSPONSOR’s recent 403(b) Summit in Orlando heard during an hour-long examination of some of the lesser-known requirements contained in the latest regulations governing the plans.

Gerry Desmond, client management leader at Gallagher Retirement Services, advised that sponsors need to develop a standard procedure to develop and distribute the required annual notice of universal availability. “You need to make sure this happens on a regular basis,” Desmond asserted.

According to a 403(b) regulatory summary prepared by Gallagher, among the exclusions provided for in the rules are ones covering:

  • Individuals working under a vow of poverty for a church-controlled organization where the person is considered an agent of the church, and
  • Visiting professors of a university if the person continues to get paid by their home university and participates in the home university’s 403(b) plan.

Employee participation will also be an issue in complying with the new discrimination testing requirements, Desmond said. All sponsoring entities are subject to the requirement that compensation that can be taken into account nder the 403(b) plan must be limited to a cretain dollar amount, currently $250,000.

Only non-governmental entities are subject to the following:

  • minimum coverage requriements;
  • average contribution percentage testing (for matching and after-tax contributions); and
  • non-discrimination in contributions and benefits.

Lynn Christiano, Senior Retirement Plan Consultant, Prudential Retirement, added that the IRS imposes limits on how much participants can defer to plans annually.

Desmond also reminded plan sponsors of the rules on the timing of investment of 403(b) participant deferrals. As with 401(k) deferrals, sponsors must forward deferrals to vendors as soon as administratively reasonable, with the guideline being within 15 business days following the month in which deferrals are made.