Road Test

The Internal Revenue Service (IRS) now requires that all 403(b) plans, not just those governed by the Employee Retirement Income Security Act (ERISA), must have a written plan document in place, effective with the 2009 plan year. In order to help plan sponsors and their advisers comply with the new requirement, many 403(b) plan providers are offering sample plan documents, or plan ­document generators. Some are interactive, and some provide more guidance than others. Discussed here are a handful of options advisers can recommend to clients.

IRS Model Language

In December 2007, the IRS released Revenue Procedure 2007-71, which contained model plan language for public school use. If a public school plan uses the model language, the IRS guarantees that the plan complies with the form requirements. Plans should know that they do not have to use the whole model language if it is not all relevant to that particular plan. “Use what is applicable to your organi­zation,” according to Robert Architect, of Tax Exempt and Government ­Entities (TEGE) at the IRS, speaking at the PLANSPONSOR 403(b) Summit. Architect also notes that plans can add language as well. The model language also can be used by other organizations. If a non-public school uses it, he notes, it becomes sample language. Examiners will not be ­penalizing organizations that use this language if not a public school.

Provider Options

Fidelity Investments introduced the Web-based 403(b) Quick, free to employers working with Fidelity. The program generates both a standard recordkeeping agreement with Fidelity and a plan document in as little as 15 minutes. Employers enter information about the plan, which is used to generate a new recordkeeping agreement that will be mailed to the employer. Once the recordkeeping agreement­ is completed, the plan documents, accompanied by a how-to manual, will follow. Available at www.fidelity.com/403bregulations, the Fidelity tool is the most attractive and compelling of the document generators. Instead of ­overwhelming the user with plan jargon or a lengthy document­, the generator simply obtains information with a few clicks, and then populates the document.

ING released 403(b) documents for both 501(c)(3) nonprofits and public schools. Sponsors utilizing these documents will have the bonus of receiving updates on statutory or regulatory changes. The ING 403(b) plan documents­ can be viewed at www.ing.com/us/403bregs. The ING documents are meant to be adopted as is. If the sponsor wishes to modify the documents, the sponsor will not be able to rely on ING’s updates to the document. That could be a deterrent for sponsors who want customization ability.

McKay Hochman Co. unveiled updated 403(b) plan documents­ for both ERISA and non-ERISA plans. The sample documents are downloaded via the Web and edited through a word processor. The company says clients can purchase unlimited use or use the documents on a one-time basis. More information is available at www.mhco.com. These documents allow for significant customization across all areas of a 403(b) plan, but the large plan document in Word might be overwhelming for some plan sponsors who are trying to determine what level of customization they need.

Another option is from plan document provider ftwilliam.com, included in the annual retirement plan document subscription or purchased on a per-plan basis for $175. The ftwilliam.com documents offer the choice of a full-scope 403(b) plan document with an ERISA/non-ERISA option that allows sponsors to provide matching, non­elective contributions and elective deferrals, or a limited-scope, non-ERISA 403(b) plan document that allows for elective contributions. ftwilliam.com is able to fill in the document by downloading information from the most recent 5500, or through an XML interface.

It is likely that more plan providers will be making such services available in the months to come as the effective date approaches. However, for those looking to create the plan document now, there are many ways in which a plan adviser can gather help for his clients