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Alert: You Need to Restate Your 403(b) Plan Before March 31, 2020

by | Jun 17, 2019 | Government Entities, Not-for-Profits

IRSBuilding-1If you have a 403(b) plan for your employees, you will have until March 31, 2020 to restate your plan, as per the IRS.

The IRS provided guidance related to the restatement of 403(b) plans. The agency began issuing approval letters to document providers for all 403(b) plans in early spring 2017. Once they have been issued, employers will be required to restate their 403(b) plans using pre-approved language.

The end of the restatement period is the date by which all 403(b) plans must be restated to remain in compliance with the 403(b) regulations. Once completed, the restatement is retroactive to Jan. 1, 2010.

Although your plan document provider will coordinate most of the work involved in the restatement, the period gives you time to review your plan’s provisions and address any issues. You may want to consider an independent review of the plan document, procedures, and compliance.

Why 403(b) Plans Must Be Restated

All 403(b) plans were required to be written in 2009. At that time, the IRS stated that it would release language at a later date, which would then require all 403(b) plans to be restated in order to remain in legal compliance.
Adopting the approved plan will assure you that the document complies with the law. In addition, you should evaluate the day-to-day procedures to be certain that your plan is operating in compliance.

The following can be done to prepare for the restatement process, according to the IRS:

  • Review your plan processes and procedures and compare them to the plan document to ensure compliance.
  • Identify any discrepancies and make any necessary changes.
  • Evaluate the plan’s provisions and decide if changes should be made. Is the plan working well? Are the employer contributions at the right level? Are employees participating?
  • Review the way your plan defines contribution. Are contributions being allocated on the definition as outlined in your plan document?
  • Review your plan’s compliance testing. Are the correct tests being performed? Is the plan passing the tests?

The IRS and Department of Labor has placed an increased review of these plans which will result in a major audit focus for 403(b) plans.

Make sure that the language used in your plan is clear. For example, if rates of contribution are based on years of service, what is the definition of years of service for this purpose?

You don’t want to subject yourself to an unnecessary audit, so make sure your plan works now, and you’ll avoid problems in the future.


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