The 403(b) Plan Restatement Deadline Is Just Around The Corner

The deadline to adopt a restated pre-approved 403(b) plan is rapidly approaching. Here's what employers need to know.

403(b) Basics

A 403(b) plan, which is sometimes also referred to as a tax-sheltered annuity plan, is a retirement plan that may generally be offered by public educational institutions and 501(c)(3) tax-exempt organizations (e.g., nonprofits). For-profit employers are generally not eligible to maintain 403(b) plans. In many respects, 403(b) plans operate similarly to 401(k) plans, allowing participants to invest retirement savings in individual accounts. 403(b) plans can be funded both by employees and employers. Importantly for this discussion, 403(b) plans must be maintained pursuant to a written plan document that complies with section 403(b) of the Internal Revenue Code.

There are two types of plan documents that may be maintained by a 403(b) plan sponsor: pre-approved and individually designed. A pre-approved plan is written and designed by a plan document provider. That provider submits it to the IRS to ensure that it qualifies under section 403(b) of the Internal Revenue Code. After the IRS has given its approval, employers can adopt these pre-approved plans through adoption agreements that allow for limited customization. This process gives employers assurance that their documents comply with the law without needing to seek individualized IRS approval.

Restatement “Cycles”

Revenue Procedure 2019-39 created a system of recurring “remedial amendment periods,” i.e., a Cycle for plan document providers to develop pre-approved 403(b) plans and for employers to adopt them. An employer that adopts a pre-approved 403(b) plan within the time period prescribed generally has assurance that its plan document complies with the Internal Revenue Code.

We are currently coming to the close of Cycle 2. The deadline for adopting a pre-approved 403(b) plan on Cycle 2 is Dec. 31, 2026. Cycle 3 kicks off the next day.

Cycle 2 includes changes to 403(b) plans required in the IRS's 2022 Cumulative List which generally includes requirements that were enacted or issued after Oct. 1, 2012 and before 2022. Some such changes include provisions related to a Supreme Court decision, the Setting Every Community Up for Retirement Enhancement Act (SECURE) Act and Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Next Steps

If you haven’t initiated a conversation with your plan document provider, benefits counsel and third-party administrator about the restatement process, now is the time to do so. A plan restatement is a good opportunity to review your policies and procedures, operational compliance and plan governance.

In addition to being required to be updated for Cycle 2, 403(b) plans must generally be updated for changes required by the SECURE Act and other recent laws by Dec. 31, 2026. For more information, see our information memo entitled “Get SECURE: Retirement Plan Amendment Deadline Approaches.”