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IRS Provides Relief for 403(B) Plan Sponsors - Plan Document Correction Update

February 11, 2013

On December 31, 2012, the Internal Revenue Service released a comprehensive update to its retirement plan correction program, the Employee Plans Compliance Resolution System (“EPCRS”) Program. Among the changes to the EPCRS Program listed in Revenue Procedure 2013-12 is an expansion of the Program to cover compliance issues faced by non-profit organizations that sponsor Internal Revenue Code Section 403(b) plans for their employees.

The expansion of the EPCRS Program to 403(b) plans is welcome relief for non-profit organizations. Now, non-profit organizations that sponsor 403(b) plans generally can correct failures to follow the plan’s terms, to satisfy the IRS’ non-discrimination requirements and/or to include IRS-required provisions in plan documents in the same manner as “for profit” organizations that sponsor qualified plans have been able to do for years.

This “plan document” correction program is worth emphasizing. For years, if not decades, many non-profit organizations have kept relatively informal documentation of their 403(b) plans. When the IRS finalized its 403(b) plan regulations in 2007, it clarified the requirement that a 403(b) plan will not qualify for tax-advantaged treatment if the terms of the plan are not set forth in a written plan document. The deadline for adopting such a written plan document, for plans in existence prior to 2009, was December 31, 2009.

Many non-profit organizations have missed this deadline. To facilitate voluntary compliance, however, the IRS published today a “Voluntary Correction Program Submission Kit” (the “Kit”) for use by non-profit organizations that failed to adopt an IRS-compliant plan document by December 31, 2009. We urge any such organization to review the Kit and consider correcting under the EPCRS Program. Doing so can be essential to preserving the tax-advantaged status of the plan.

Please feel free to call Adam B. Cantor should you have any questions about the EPCRS Program generally or the Kit in particular. 

Adam B. Cantor | Chair, Employee Benefits and Executive Compensation Group | (973) 530-2020 | acantor@wolffsamson.com