IRS Reminds 403(b) Plan Sponsors of Common Plan Errors
In a new publication, the IRS lists rules for 403(b) compliance and resources from the agency to help plan sponsors.
In an updated page on its website, the Internal Revenue Service (IRS) has listed common 403(b) plan mistakes, IRS services, products and assistance to help 403(b) plan sponsors stay in compliance.
“It’s important to know the tax rules that apply to your 403(b) plan and to pay attention to the operation of your plan,” the IRS says.
One area in which the IRS says it commonly finds mistakes is with the written plan document requirements. The IRS reminds plan sponsors that a 403(b) plan doesn’t need to be a single plan document; sponsors can compile the salary reduction agreements, the contracts that fund the plan, and written procedures for eligibility, benefits, dollar limitations, nondiscrimination and universal availability. However, the IRS notes a single plan document makes administration easier, especially if the plan has multiple vendors.
There is now a pre-approved plan program from the IRS, and Section 21 of Revenue Procedure 2013-22 establishes a remedial amendment period under which an eligible employer can retroactively correct form defects in its written 403(b) plan in order to satisfy the written plan document requirement of the 2007 final regulations. Revenue Procedure 2017-18 provides that the last day of the remedial amendment period for 403(b) plans is March 31, 2020.
The IRS also notes it commonly finds mistakes regarding:
- Ineligible employers;
- Universal availability rules;
- Depositing elective deferrals;
- Excess elective deferrals;
- Contribution limits;
- Hardship distributions;
- Post-severance contributions; and
- In-service exchanges and transfers.
The new page includes links to resources from the IRS to aid in 403(b) plan compliance, including its 403(b) Plan Fix-It Guide.
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