(b)lines Ask the Experts – Correction for Failure to Adopt a Plan Document

“The individual who would have executed the plan document at the time, along with all of his colleagues, have since departed the organization, so I have no idea what happened. Any advice on where we go from here?” 

Michael A. Webb, vice president, Retirement Practice, Cammack Retirement Group, answers: 

Failure to execute a 403(b) plan document has been one of the most popular reader questions to Ask the Experts since the columns inception, and we have addressed the issue on two occasions in the column, (see “(b)lines Ask the Experts – Revisiting the Plan with no Signed Document” and “(b)lines Ask the Experts – No Plan Document”).

The only significant development since that time is that the failure to adopt a 403(b) plan may now be corrected via the IRS Voluntary Correction Program (VCP) (see the IRS’ 403(b) Fix-It Guide for details). It should be noted, however, there is a fee to use this program, and the 50% discount that was in place for plan sponsors filing solely to correct a failure to adopt a written 403(b) plan expired on 12/31/2013.

As for our other guidance from the prior articles, most remains relevant, though we have not heard formally from the IRS in some time about the issue of the use of several separate documents that, when taken together, could constitute the adoption of a written plan for 403(b) purposes. Thus, plan sponsors that may have taken this “multiple-document” approach to satisfy the requirements, or that otherwise may not have executed a 403(b) plan document by 12/31/2009, should work with benefits counsel well-versed in such matters to address the issue.

Thank you for your question!

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.