Information on the Final 403(b) Regulations
On July 23, 2007, the IRS issued final regulations under Section 403(b) of the Internal Revenue Code that were issued in proposed form on November 15, 2004. These final 403(b) regulations replaced the original regulations that were issued in 1964 and apply to all 403(b) plans, at least in part, including government, church and non-ERISA TDA plans. The new regulations will generally apply in taxable years beginning after December 31, 2008.
Subsequently, however, in Notice 2009-3, the IRS extended to December 31, 2009, the effective date of the requirement that 403(b) plan sponsors have a written plan document (or a series of documents that function as a plan document) that outlines the terms of the plan and investment provider responsibilities. Please note, however, that the IRS did not extend the effective date of the regulations or other deadlines for operational compliance with the new 403(b) regulations.
Simultaneously, the IRS posted a new home page on their website that provides links not only to the new 403(b) regulations and the IRS’s own summary and presentations on them, but also links to a wide range of other IRS publications for 403(b) plans.
The Department of Labor also issued a Field Advisory Bulletin, DOL FAB 2007-02, providing guidance on how the regulations will affect the exemption from ERISA for certain tax-deferred annuity (TDA) plans.
TIAA-CREF Materials on the Final 403(b) Regulations
Immediately after their issue, TIAA-CREF prepared a detailed analysis of the final regulations, and a checklist for administrators that outlined the basic changes and required actions by administrators.
We then followed these publications with an online webinar, Final 403(b) Regulations: A Look at the Changes, that covered the basics of the final regulations.
Information on 90-24 Transfers
The final 403(b) regulations are, for most purposes, effective on January 1, 2009. However, beginning on or after September 25, 2007, the final 403(b) regulations provide that Revenue Ruling 90-24 has been repealed. The regulations further provide that transfers from a 403(b) contract issued by a vendor approved under the plan to an unapproved vendor’s 403(b) contract are not permitted unless the unapproved 403(b) vendor enters into an information sharing agreement with the 403(b) plan sponsor by January 1, 2009. For information on the changes, view our online article, 403(b) Final Regs: Confirm Your Approved Providers.
Further Guidance from the IRS
On November 27, 2007, the Internal Revenue Service released Revenue Procedure 2007-71, effective on December 31, 2007, which contains guidance for implementing the required changes.
The guidance focused primarily on two subjects:
- Transitional rules for contracts issued prior to the regulations’ effective date (January 1, 2009) including contract exchanges with vendors not authorized to accept contributions under the plan
- Model plan document language for salary deferral plans for public schools. The final 403(b) regulations and Revenue Procedure 2009-3 generally require all 403(b) plans (including governmental plans) to have written plan documents in place by December 31, 2009.
How TIAA-CREF Helps
We continue to keep you informed of developments relating to the final 403(b) regulations, and their implications for the typical 403(b) plan funded with TIA-CREF annuity contracts and mutual funds. An array of information and resources relating to regulatory requirements for plan administrators is available through our 403(b) Resource Center on the TIAA-CREF Plan Sponsor website, www.tiaa-cref.org/plansponsors.
- LINK TO IRS WEBPAGE: http://www.irs.gov/retirement/article
- DOL FAB LINK: http://www.dol.gov/ebsa/regs/fab2007-2.html
- REV PROC LINK: http://benefitslink.com/IRS/revproc2007-71.pdf
- TIAA-CREF WEBSITE LINK: http://www.tiaa-cref.org/plansponsors/index.html