Publications

Focus on IRS Guidance IRS Issues Comprehensive 403(b) Proposed Regulations for Tax-Exempt Employers

Fall 2005
Employment & Employee Benefits Developments - Fall 2005

Tax-sheltered annuity plans ("403(b) plans") offered by 501(c)(3) tax-exempt organizations or public schools are subject to the requirements under Section 403(b) of the Internal Revenue Code of 1986, as amended (the "Code"). The Internal Revenue Service issued proposed regulations that consolidate, reorganize and modify the final regulations last issued 40 years ago, before the enactment of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The proposed regulations are expected to become effective beginning in 2006, and cannot be relied upon until finalized. The proposed changes are significant and, when finalized, will necessitate modification of almost all 403(b) plans. The proposed regulations diminish the extent to which 403(b) plans differ from other salary reduction arrangements, such as 401(k) plans. We highlight below the numerous requirements addressed in the proposed regulations.