While RP 2007-71 was intended to simplify the written plan requirement and ensure regulatory compliance, Symetra and other 403(b) providers are urging a cautious approach when using the model language to create plan documents for their clients.

The new 403(b) regulations require that all contracts include and be maintained pursuant to a written plan specifying material terms and conditions for benefits provided under the plan. In RP 2007-71, the IRS provides model plan language that may be used either to adopt a new written plan to reflect the requirements, or to amend existing 403(b) plans to comply with the new regulations.

Sounds simple, right? Not exactly.

According to RP 2007-72, employers who adopt the model language provided in RP 2007-71 can be assured that they are within compliance of the new regulations. However, the model language provided by the IRS is written only for public schools that choose to offer a very basic plan. It must be adopted on a word-for-word basis, both in adoption and operation of the plan in order to receive the guarantee of compliance. Other organizations may modify the language to fit their need, but will not be granted the guarantee.

Other reasons for caution:

• The language excludes a plan from offering a Roth opportunity.



• It assumes all loans will be repaid via payroll deduction, and this is not the case in public schools.



• It conflicts with a number of standard insurance contractual clauses and presents severe operational problems in others.



• Only cash rollovers are permitted, meaning rollovers of annuity contracts and MF accounts are not allowed.
  
  
• It indicates that an information sharing agreement is not necessary for any approved vendor who will be receiving contributions under the plan but for all others, it is required.

Now the good news
The IRS advisory does include some positive developments. The guidance gives some relief in regard to ‘orphan’ accounts, or those that are no longer affiliated with an employer or the vendor is no longer an approved vendor under the employer Plan. For contracts issued after 2005 but prior to 2009 that have not received subsequent contributions, the employer may make a good faith effort to include the contract as part of the Plan. This appears to mean that the employer need only provide contact information to the vendor and the vendor becomes responsible for determining viability of hardship and loan requests.

Contracts issued before 2009 for former employees and beneficiaries will be treated similarly. It seems clear that employers will not be expected to obtain data for contracts issued prior to 2005 where no ongoing contributions are being made. The IRS is accepting comments regarding Rev. Proc. 2007-71, so additional changes may be forthcoming. Plans must be adopted no later than January 2009.

Symetra is here to help
The new guidelines are intended to bring 403(b) plans closer in line with their 401(k) cousins, requiring much more involvement and oversight by plan sponsors. As the 403(b) market continues to evolve, helping employers adapt to their new responsibilities and ensuring a smooth transition will be the key to preserving benefits business at educational and nonprofit organizations.

Working with a provider like Symetra, with extensive expertise in both the 403(b) and 401(k) markets, can be a big help in ensuring a smooth transition for your current and future clients.

For more information about Symetra’s retirement plans, visit our web site or contact the Symetra Sales Center at 1-800-706-0700 or invest@symetra.com.