Employers that allow employees to contribute to 403(b) plans and arrangements need to adopt a plan document by December 31, 2009 if they have not already done so. In adopting a plan document, employers that have a voluntary 403(b) plan which the employer intends to be exempt from ERISA should review the plan document and their practices to confirm the 403(b) plan is not subject to ERISA.

Approaching Deadline
The final regulations under Section 403(b) of the Code, published in July 2007, required all 403(b) plans to have a plan document in place by January 1, 2009. See 26 C.F.R. 1.403(b)-3(b). When the enormity of that requirement became apparent, the IRS published Notice 2009-3, which extended the deadline to adopt a plan document for 403(b) plans to December 31, 2009. Employers should contact the retirement provider they work with to ensure that their plan will comply with this plan document requirement. Failure to comply may result in past and current contributions being included in employee compensation.

Existing Plans May Need to be Amended
Employers who have already adopted a plan document for a 403(b) plan may need to amend the plan document this year to keep the plan document up to date. Plan documents need to be revised almost annually to reflect changes in the laws and regulations that govern retirement plans. Employers who have a plan document may need to amend their plan documents to account for recent law changes – for example, changes under the Pension Protection Act of 2006. Employers should contact the retirement provider they work with to confirm their plan document is up to date with all required amendments.

ERISA Applicability
ERISA applies to retirement plans, but there is an exception for voluntary 403(b) plans. In general, to qualify for the exemption, the 403(b) plan must be voluntary, the employees must be allowed to choose among a reasonable number of retirement providers, the employer cannot contribute employer dollars, and the employer can have only limited involvement with respect to the 403(b) plan (such as deducting and forwarding the voluntary contributions). See 29 C.F.R. § 2510.3-2(f); Field Assistance Bulletin 2007-02 (July 24, 2007). If a plan is subject to ERISA, the employer must satisfy ERISA’s administrative, disclosure, and fiduciary requirements. If an employer is not certain whether their 403(b) plan is subject to ERISA, they should have their 403(b) plan and practices reviewed to avoid failure to comply with ERISA.

Conclusion
Employers that sponsor 403(b) plans should contact their retirement providers to ensure their 403(b) plan documents comply with the plan document requirement and changes in the law. Although retirement providers typically manage the compliance issues associated with 403(b) plans, employers are responsible for ensuring compliance. If you wish to discuss these requirements, please contact your retirement provider or the attorney in the Benefits and Compensation practice group with whom you work.