Effective January 1, 2009, sponsors of 403(b) plans were required to have a written plan document. In Notice 2009-03, the IRS gave plan sponsors until December 31, 2009 to adopt a written plan document. Plan sponsors who failed to adopt a written plan document by December 31, 2009 had no official way to correct that failure.
The IRS recently issued Rev. Proc. 2013-12 which updates its Employee Plans Compliance Resolution System. As anticipated, the new EPCRS allows plan sponsors to retroactively correct the failure to adopt a written plan document for a 403(b) plan by December 31, 2009. Correction requires a submission to the IRS through its Voluntary Correction Program. The Voluntary Correction Program fees are generally determined based on the number of plan participants. The normal fee is discounted by 50% if the plan sponsor submits by no later than December 31, 2013 and there are no other failures (i.e., the plan has been administered properly).
If you haven’t adopted a written plan for your 403(b) or had it reviewed to ensure it meets the IRS’ requirements, now is the time to address it so that any technical mistakes can be retroactively corrected under the voluntary correction program. For more information, contact Lisa Womack at firstname.lastname@example.org or (602) 604-6255.
Ellis Carter is a nonprofit lawyer licensed to practice in Washington and Arizona. Ellis advises tax-exempt clients on federal tax matters nationwide.