(b)lines Ask the Experts – Plan Documents Not Amended for All Legislation

May 1, 2012 (PLANSPONSOR (b)lines) – “An ERISA  403(b) plan sponsor adopted a plan document back in 1997, but never amended  the document to reflect legally required provisions of subsequent legislation (GUST, EGTRRA, PPA, etc.).

“The client is now being updated to reflect the prior amendments, but is the plan sponsor now considered to be a non-amender for the period since 1997?”  

Michael A. Webb, Vice President, Retirement Services, Cammack LaRhette Consulting, answers:  

Excellent question, but we might want to define for our audience exactly what a non-amender is before we address this issue. A non-amender failure is specifically identified in Revenue Procedure 2008-50 (otherwise known as the Employee Plans Compliance Resolution System (EPCRS), the guidance regarding correction of retirement plan defects) as a failure to amend the plan to correct a disqualifying provision within the remedial amendment period (failure to amend the plan to reflect required Code provisions would fall into this category).  

The problem is 403(b) plans have no remedial amendment period, since the IRS has yet to issue a determination letter program for 403(b) plans. And, in fact, EPCRS specifically excludes 403(b) plans from correction of non-amender failures under the Voluntary Correction Program (VCP).  

However, the IRS has not been completely silent on the subject. In Announcement 2009-89 the IRS stated that, once a prototype program (or determination letter program, if applicable) is available, documents with any form defects will be able to be corrected retroactive to January 1, 2010, during a remedial amendment period (see “IRS Offers Assurance until 403(b) Prototype Program Begins”). And Notice 2009-3 provided for a “best efforts” standard of operational compliance with the final 403(b) regulations, without requiring that a formal plan document be in place until December 31, 2009.  

So what is a plan sponsor to do? The Experts would strongly recommend that benefits counsel with specific expertise in 403(b) plan issues be consulted to determine the best course of action, but, given the IRS guidance thus far, a possibility might be that the plan is simply updated for all missed amendments at present, and formally restated during a future remedial amendment period to be determined.  


NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.