A 403(b) tax-sheltered annuity (TSA) plan is a retirement plan offered by public schools and certain tax-exempt organizations. An individual’s 403(b) annuity can be obtained only under an employer’s TSA plan. Generally, these annuities are funded by elective deferrals made under salary reduction agreements and nonelective employer contributions.
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What's New 403(b) Mini-Courses Proposed amendments to the regulations relating to certain cash or deferred arrangements and matching contributions under section 403(b) plans were published in the Federal Register. The proposed regulations would allow plans that incur substantial business hardship to reduce or suspend safe harbor nonelective contributions during a plan year. A special edition of Employee Plans News contains a brief summary of the proposed amendments. Announcement 2009-34 The draft revenue procedure explains the proposed 403(b) plan prototype program for issuing opinion letters and the sample plan language can be used to draft §403(b) prototype plans. Interested persons are invited to comment on the drafts of the revenue procedure and the sample plan language or any other aspect of the §403(b) prototype plan program. The IRS also requests entities that anticipate filing an opinion letter application as a §403(b) prototype plan sponsor send an email to ep.prototype.projections@irs.gov (mass submitters should send an estimate of the number of opinion letter applications it may seek for sponsors.) Also, read our Special Edition Newsletter article for additional information regarding the draft revenue procedure.
This notice provides relief during 2009 for sponsors of §403(b) plans with respect to the requirement to have a written §403(b) plan in place by January 1, 2009. This notice also briefly describes other programs the Service intends to establish relating to §403(b) plans.
This revenue procedure provides model language that may be used by public schools either to adopt a written plan to reflect the requirements of the final 403(b) regulations or to amend its 403(b) plan. Read our Special Edition newsletter describing the revenue procedure. General Questions Who can establish a 403(b) plan? You are allowed to have a 403(b) plan if you are a:
How do 403(b) plans work? Basically, 403(b) plans are similar to 401(k) plans. Just as with a 401(k) plan, a 403(b) plan lets employees defer some of their salary. In this case, their deferred money goes to a 403(b) plan sponsored by the employer. This deferred money generally does not get taxed by the federal government or by most state governments until distributed. What are the advantages of participating in a 403(b) plan? There are significant tax advantages for participants in a 403(b) tax-sheltered annuity:
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Resources: Guidance: 403(b) Final Regulations Published July 26, 2007 in the Federal Register, with a general effective date of taxable years beginning after December 31, 2008, these regulations encompass the changes made by legislation from the past 43 years. By diminishing the extent 403(b) plans differ from other salary reduction arrangements (401(k) and 457(b)), administration of 403(b) plans will be simpler, which should lead to increased compliance. Related Guidance: 409A Regulations & Guidance, Rev Proc 2007-71, Model Plan Language Notice 2007-7, Q&As Relating to Recent Legislation Notice 2005-5, Automatic Rollover Rev Rul 2004-12, Rollovers to Eligible Retirement Plans Rev Rul 2001-51, EGTRRA Changes to IRC 415 Requirements Announcement 2001-106, Tax Credit for Retirement Plan Contributions for Low-Income Savers Notice 2001-56 , EGTRRA Changes to Compensation Limits FAQs: Sec. 409A and Deferred Compensation Prior Law Guidance EP Exam will be reviewing 403(b) plans under pre-regulation guidance and interpretation for years before 2009. Rev. Rul. 2009-18, 2009-27 I.R.B. 1
The revenue ruling notes that a number of guidance documents had become outdated due to numerous intervening statutory revisions enacted in section 403(b). Final regulations under sections 1.403(b)-1 thru 11 have been issued. Since these regulations include and modify much of the IRS guidance relating to section 403(b) issued between 1964 and 2004, the guidance documents listed in the revenue ruling are obsoleted or superseded in their entirety, with one partial exception (Notice 89-23). Department of Labor-Employee Benefits Security Administration Information Reporting and Coverage for 403(b) Plans Includes the recent Field Assistance Bulletin regarding Annual Reporting and ERISA coverage for 403(b) Plans
Additional Resources: The IRS Retirement Plans Navigator - a retirement plan Web guide for small employers. |
Publications:
Pub. 4484, Choose a retirement plan for employees of tax-exempt and government entities (schools, hospitals, churches, charities)
Pub. 4483, 403(b) Tax-Sheltered Annuity Plan for Sponsor
Pub. 4482, 403(b) Tax-Sheltered Annuity for Participants
Pub. 4547, Have you had your check-up this year? for 403(b) Retirement Plans
Pub. 4546, 403(b) Plan Checklist
Pub. 4530, Designated Roth Accounts under a 401(k) or 403(b) Plan
Pub. 571, Tax-Sheltered Annuity Plans for Employees of Public Schools and Certain Tax-Exempt Organizations
Pub. 575, Pension and Annuity Income
Pub. 15, Circular E, Employer’s Tax Guide