The Pension Protection Act Blog

As the general deadline of January 1, 2009 creeps closer and closer for most 403(b) plans to comply with the Final 403(b) Regulations, the applicability dates in the Final 403(b) Regulations deserves a little scrutiny. For church 403(b) plans, the deadline for complying with the Final 403(b) Regulations depends on whether the authority to amend or establish the plan is with the church convention.

The reason for this is contained within the “Applicability Date” section of the Final 403(b) Regs, which state:

“For a section 403(b) plan maintained by a church-related organization for which the authority to amend the plan is held by a church convention (within the meaning of section 414(e)), the regulations do not apply before the beginning of the first plan year following December 31, 2009.”

The IRS further explains this provision in the FAQ posted on their website. It states:

“The general effective date of the regulations is for taxable years beginning after December 31, 2008. There are some notable exceptions….Churches that sponsor 403(b)s where the obligation to either establish the 403(b) or amend the 403(b) plan itself is an outcome of a church convention. So merely because a 403(b) plan is sponsored by a church does not, in and of itself, mean that it’s going to experience a delayed effective date but rather, where the authority to amend or establish the plan would be with the church convention.”

The church convention delay is reasonable because some church conventions meet only once a year or once every other year. It could also prove to be problematic for some church 403(b) plans who do not meet the church convention requirement if they mistakenly wait to comply with the Final 403(b) Regulations due to a mistaken belief that compliance is not required before the beginning of the first plan year following December 31, 2009.

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