Internal Revenue Service issues regulations on 403(b) plans
The Internal Revenue Service has issued long awaited regulations on 403(b) plans. 403(b) plans allow public school employees, among others, to defer taxes on their salary. Probably the most widely noted change is that 403(b) plans must now have a written plan. The written plan document must describe how responsibilities are allocated between the employer, the entity offering investment options, and any other party involved. The new regulations allow the employer to terminate the 403(b) plan and explain how to do so. The new regulations also make clear that 403(b) plans that allow employee contributions must satisfy the universal availability rule, in other words, must permit, with some exceptions, all employees to participate. The final regulations also confirm that catch-up contributions are available for participants age 50 and over and for participants with at least 15 years of service. With some exceptions, the rules are effective after December 31, 2008.
72 Fed. Reg. 41,128 (July 26, 2007)
[Final regulation]
[IRS newsletter on universal availability related to school district 403(b) plans]
[Inquiry & Analysis article on fiduciary duty related to 403(b) plans]