Deadline is Near for Revising Your 403(b) Plan Document

If you still have your original plan document in use, it is very likely that the IRS deadline for updating your 403(b) by March 31, 2020 applies to you.

Hey Cinderella - On March 31, 2020 will your 403(b) coach turn into a pumpkin? If you do not take action soon this may happen.

If you still have your original plan document in use, it is very likely that the IRS deadline for updating your 403(b) by March 31, 2020 applies to you.

In 2007 the Internal Revenue Service (IRS) issued final regulations for all employers having a 403(b) plan requiring them to have a written plan document covering the terms of the plan. The deadline to adopt such a document (or collection of documents) was January 31, 2009 effective January 1, 2009. The IRS provided model written plan language in 2007 that was used by many third party administrators (TPA) and employers (Revenue Procedure 2007-71).

At the time these regulations were written, the IRS did not provide any way for employers or vendors to get pre-approval for a 403(b) plan document. The only way to do this was to request a private letter ruling, which is expensive and time consuming. The IRS has long had pre-approved document programs for 401(k) and many other types of plans.

The IRS addressed this problem in 2013. For the first time Revenue Procedure 2013-22 allowed qualified vendors, third party administrators and other service providers to offer employers pre-approved plan documents in several varieties. The IRS also gave relief to employers who would adopt these documents from the need to amend their plans to keep them current with law and regulatory changes.

The deadline for adopting a pre-approved plan document for your plan is March 31, 2020. If you do not adopt such a document by then you and your plan will be on their own. Your plan will have to be amended or restated to bring it up to date for all legal and regulatory changes applicable to 403(b) plans from 2009 through 2020. If the IRS examines your plan and you don’t have either a pre-approved document or a document amended to be up to date, your organization and plan participants could face serious problems. The plan could be “disqualified” making all accounts subject to taxation. Although this is unlikely you do not want to push your luck.

What should you do?

  1. If you have a TPA, contact them to be sure they are providing an IRS pre-approved 403(b) plan document for your plan well before March 31, 2020. You will need time to review it and get it signed. Some TPAs may require that your board approve the new document.
  2. If your TPA is not providing this consider finding another TPA. We believe that all of the best TPAs will provide such a document.
  3. Be very careful about using documents or services from TPAs that do not specialize in public school districts. TPAs that specialize in corporate plans may have provisions that subject your plan to ERISA* or sections of the Internal Revenue Code that should not apply to public schools.
  4. Some 403(b) product vendors will probably contact you and offer an IRS pre-approved 403(b) plan document at no charge. Be very careful about this.
    1. First, a vendor’s document may favor the vendor or certain types of vendors. A competent TPA should provide an unbiased document.
  5. Second, Texas law states, “An educational institution may not: . . . (6) accept any benefit from a company or from an agent or affiliate of a company that offers qualified investment products;”**

If you have questions please feel free to contact us at (512) 600-5221 or by email at

*Employees Retirement Income Security Act of 1974
**Texas Government Code Title 109, Art. 6228a-5. Sec. 9. (a)

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