The deadline for plan sponsors to update their 403(b) plan documents to a pre-approved plan is quickly approaching.
Background
On March 31, 2017, the Internal Revenue Service (IRS) issued a letter regarding pre-approved prototype plans in Revenue Procedure 2017-18. This stated that to ensure plan sponsors’ document language was compliant with the IRS, sponsors could update their plan documents to one of the IRS’s pre-approved plans by March 31, 2020.
Pre-approved Plan Documents
The new pre-approved plan documents provide an opportunity for a thorough review of compliance in plan operations and the ability to make necessary corrections during the remedial amendment period. Ultimately, adoption of a pre-approved plan offers protection from noncompliance issues that could result in penalties.
Next Steps as a Plan Sponsor
Most service providers for 403(b) plans have already received their IRS opinion letters and have contacted plan sponsors about this update. When completing the new document, plan sponsors should conduct a detailed assessment of their current processes to ensure that their new document appropriately reflects their plan provisions. Sponsors should also take precise care in completing the document to confirm accuracy, as failure to properly complete the document could result in significant penalties in the form of compliance fees and additional or unintended plan participant fees.
We recommend you consult with your service provider as soon as possible to begin the restatement process. Most organizations require board approval regarding the plan restatement and should therefore consider allotting adequate time to complete the process.
We also highly recommend that you engage ERISA counsel familiar with the provisions of your plan document provider to ensure a cost effective and accurate plan restatement process. If you are interested in receiving recommendations for assistance or have any questions regarding the process, please contact your Sikich consultant.
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