After many, many years, the Internal Revenue Service issued new, up-to-date regulations that are designed to bring 403(b) arrangements into the current world of retirement plans. These regulations were long overdue and truly mark the beginning of a new era in 403(b) plans. The new regulations provide enhanced details on plan provisions, require additional plan documentation, and eliminate form 5500 reporting exemptions. In the end, the regulations are designed to provide greater structure in order to protect plan participants, but will be quite challenging for unprepared employers.

Click HERE for an presentation of the overview of the new 403(b) requirements.  The final 403(b) regulations including a detailed tax index can be found by clicking HERE.

Preparing For The New Audit Requirement For ERISA Covered 403b Plans

ERISA vs. Non-ERISA is the first question facing most employers. In general, a 403(b) plan is considered a non-ERISA plan if the employer acts as nothing more than a facilitator for the deposit of employee salary withholdings. The regulatory agencies have been reluctant over the years to provide a “bright line test” that would provide employers with a mechanism to determine their plan’s ERISA status. ERISA plans have many more regulatory requirements and are impacted more significantly by the new regulations. There have been many instances where the ERISA or non-ERISA tag has been misapplied. We typically suggest that counsel get involved to ensure a proper determination is made. In general, we have seen plans trending to the ERISA designation with some vendors requiring it.

Field Assistance Bulletin #2007 provides a framework for a making the ERISA determination.

Field Assistance Bulletin # 2010-02, questions 14 -18, provides additional clarification on the determination.

For plan years beginning after December 31, 2008, ERISA 403(b) plans will no longer enjoy a limited Form 5500 filing exemption. Non-ERISA plans have never been required to file the Form 5500 and that remains unchanged. ERISA plans however, are now required to file a complete Form 5500 just like their 401(k) plan counterparts. The AICPA Employee Benefit Plan Audit Quality Center developed the following to assist sponsors of 403(b) plans in preparation of the new filing requirement. Plans that are deemed to be “large” will be required to submit an accountant’s opinion as part of the submission.

403(b) Plan Retirement Plan Audits-EBPAQC's Live Form

EBPAQC's Form 5500 Reporting and Independent Audit Requirements

Employers should be mindful of the electronic filing requirement for plan years that begin after December 31, 2008. For most sponsors of 403(b) plans, this means that their first “full” 5500 filing will be via the new electronic filing process. All 5500’s, without exception, will require submission using the Efast2 process. The details of this new requirement can be found at: http://www.efast.dol.gov/welcome.html.

Field Assistance Bulletin # 2010-02, questions 1-13, provides describes reporting relief related to certain contracts for participant count and plan asset determination purposes.