CONGRESS AND IRS ISSUE HELPFUL YEAR END GUIDANCE

IRS Notice 2009-03: Delayed Effective Date for 403(b) Plan Documents In 2007 the
IRS issued final regulations for 403(b) plans which, among other things, required 403(b) plans toadopt written plan documents that satisfied the regulations by January 1, 2009. This requirement was problematic because many 403(b) plans did not previously have a plan document, there is no prototype plan document program currently available for 403(b) plans,and there is no determination letter program for IRS approval of individually designed 403(b)plan documents. The IRS recently delayed this effective date until December 31, 2009, although 403(b) plans must operate in compliance with areasonable interpretation of the new regulations during 2009 and must retroactively correct any operational failures that occur during 2009 to conform to the terms of the written plan document. Worker, Retiree, and Employer Recovery Act of 2008 Earlier this month Congress passed, and President Bush has indicated he will sign, the Worker, Retiree, and Employer Recovery Act of 2008 (the “Act”). The Act contains two main components.
Title I contains technical corrections related to the Pension Protection Act of 2006 (“PPA”). Title IIprovides relief to both plan sponsors and plan participants related to the current economic crisis.
Following are some Title I technical corrections relevant to defined contribution plans:

• Plans must allow for non-spouse beneficiary rollovers for plan years starting January 1, 2010, or later and the beneficiary must receive an eligible rollover distribution notice.
• Automatic contributions arrangements can include the 90 day permissible withdrawal
feature regardless of whether the plan’s default fund qualifies as a QDIA.
• Gap period earnings are not required to be included when making distributions of excess deferrals (PPA previously eliminated the need for gap-period earnings when distributing excess contributions or excess aggregate contributions).
The key impact on defined contribution plans in Title II is that required minimum distributions (often referred to as “RMD’s” or 70 ½ distributions) otherwise due for 2009 are waived. This impacts all 401(a) plans (including 401(k) plans); 403 (a) and (b) plans; certain 457(b) plans and IRA’s. Congress did not make any changes to the RMD requirements for 2008 distributions.


Nothing in this publication constitutes legal or tax advice upon which any 3rd party may rely.



Source: Great West Life Legal Wise Newsletter