403(b) ERISA & Non-ERISA Plan Document Restatement
Qualified Retirement Plans, with the exception of 403(b) Plans, have had a “written plan document” requirement since 1974 when the Employee Retirement Income Security Act (ERISA) was enacted. Since then, as changes in the law occur, retirement plans are required to comply in operation with the new provisions as of the effective date of the law. The IRS provides Remedial Amendment Periods during which the plan must adopt interim amendments so that the plan’s language conforms to the plan operation. Retirement plan documents must then be restated in their entirety at set intervals, typically every five to six years, incorporating the required interim amendments.
This restatement process has been ongoing for other qualified retirement plans (such as 401(k), profit sharing, defined benefit) since 1974, using documents that have been “pre-approved” by the IRS, to ensure compliance with regulations. But 403(b) plans are new to the “written plan document” requirement. Final 403(b) regulations enacted in 2007, extended the written plan requirements to all 403(b) plans, with no exception for governmental, most church, or non-ERISA salary deferral only plans. Prior to 2009, 403(b) plans were not required to have a written plan document but the final 403(b) regulations required 403(b) plans to have the written plan document in place by December 31, 2009.
To bring consistency between the 403(b) and other Qualified Retirement Plans, the IRS has recently created a pre-approved plan document program for the 403(b) Plans, and we are please to notify you that Pension Works is sponsoring a plan that can be used to bring your plan in-line with the new restatement requirement. This first round of 403(b) plan restatements began March 31, 2017 and must be completed for all 403(b) plan sponsors no later than March 30, 2020. We believe the sooner you update the plan the better. The restatement process will help insure the plan is the way you intend and in sync with its actual operation protecting you if it comes under scrutiny from an IRS or Department of Labor audit. We will be contacting you soon to start the restatement process of your plan documents.
The following can be done to prepare for the restatement process:
- Review your plan processes and procedures, and compare them to the plan document to ensure that the plan is being operated in compliance with the plan document.
- Evaluate the plan’s provisions and decide if changes should be made. Is the plan working well? Are the employer contributions at a desirable level?
- Review your plan’s definition of compensation. Are contributions being allocated on the definition of compensation as outlined in your plan document?
- Review language on contribution groups or tiers to be sure it is clear and does not leave the groups open to interpretation. For example, if rates of contribution are based on years of service, what is the definition of years of service for this purpose? At what date does the change in grouping take effect?
- The fee for the preparation of the Plan Restatement will be $1,800. Review your budget to see when an appropriate time is for you, keeping the March 30, 2020 deadline in mind.
Pension Works Services Offered for Non-ERISA Plans
ERISA plans are required to file a Form 5500 with the Employee Benefits Security Administration (EBSA ) and our office provides full Third Party Administrative (TPA) services to those plans. Non-ERISA 403(b) plans are not required to file a Form 5500 with the EBSA. Many Employers who sponsor Non-ERISA 403(b) plans do not realize that they can still take advantage of the TPA services our office can provide, for example assistance with annual notifications to participants, asset reconciliation, review of deposits and withdrawals, and distribution processing. Please see the attached Fee Disclosure document for a breakdown of our fees.