Checklist Regarding New 403(B) Regs

1.) Have you created a plan document?

The IRS deadline for adopting a plan document is December 31, 2009 - failure to do so will disqualify your document.

Employers must adopt a written plan document that satisfies the requirements of the regulations and that is retroactive to January 1, 2009.  During 2009, the employer must operate the plan in accordance with a reasonable interpretation of the regulations; and by the end of 2009, the plan must make its best effort to retroactively correct any failures in the operation of the final terms in the plan document.   Your Board should approve the adoption of the 403(B) plan document.

2.) Have you selected a Third Party Administrator (TPA)?

Although it is not required, most entities contract with a TPA to handle the administration of the plan.  The TPA will create, maintain, and update the plan document.  The TPA will also establish governance, perform any year end testing and file IRS form 5500. 

3.) Have you decided on the plan provisions?

Who will be eligible to participate in the plan?  Will you offer a Roth 403(B) provision?  Will you allow loans and hardship withdrawals?  Will Participants be allowed to roll amounts from other qualified plans into your 403(B)?  What is your year end?  These provisions need to be outlined in your plan document.

When a plan document is designed these provisions should be considered.

4.) Have you documented the qualified investment providers in your plan document?

If you have more than one investment provider, have you prepared the necessary information sharing agreements between the providers?

5.) Have you created/updated your 403(B) salary reduction agreement and had it signed by all eligible employees?  Have all eligible employees been identified and given the opportunity to make an elective contribution? 

6.) Have you communicated the new plan provisions and governmental changes, as required by the IRS, to employees?

7.) Are you timely depositing employee deferrals each pay period in accordance with Department of Labor Regulations?

You are required to deposit deferrals as soon as they can be segregated from the employer’s assets.  This is most likely the same time that you make payroll tax deposits. 

8.) Have you retained copies of salary reduction agreements, designated beneficiary forms, loan documents, hardship applications, distribution requests and rollover requests for each eligible employee?

9.) Have “Large Plans” engaged a qualified CPA firm to audit the plan annually?

The Department of Labor requires “Large Plans” to attach an audited financial statement to its IRS form 5500.   A Large Plan is one that has 100 eligible employees at the start of the plan year.   The auditor will have to conduct such audits in accordance with specific DOL regulations.  Therefore, it is critical to engage a firm that specializes in performing employee benefit plan audits.  The auditor will be required to confirm fund balances with investment providers, ensure that the plan is operating in accordance with the plan document, test deposits for timely remittance, and test employee files for proper salary reduction agreements and other paperwork, as well as many other steps.

For more information, please contact Paul McGovern at pmcgovern@downeycocpa.com or at  800-849-6022.