570-346-9960 info@deheymcandrew.com


:: New Section 403(b) Regulatory Changes ::

For the first time, EMPLOYERS and School Districts will assume full responsibility for administering and regulating retirement savings plans, commonly known as Tax Sheltered Annuities (TSAs) implemented by the Internal Revenue Service (IRS) and Section 403(b) of the Internal Revenue Code.

These new regulations, which are part of a major overhaul of non-profit retirement plans implemented by the IRS, represent a significant increase in administrative responsibilities, compliance, and liability and risk issues for business leaders. The proposed regulations are intended to bring the requirements for Section 403(b) plans in line with the requirements for Section 401(k) and public Section 457(b) plans. This increased responsibility comes at a time when administrators and School Districts have limited resources to assume new responsibilities for employee benefits.

On July 26, the Internal Revenue Service introduced the significantly revised regulations for governing the 403(b) plans. This update reflects over 40 years of tax acts into these comprehensive new regulations. The new regulations are effective July 26, 2007 and the applicability date for plans after December 31, 2008.

At DeHEY & McANDREW, we recognize the significant administrative impact the new regulations will have on public business administrators and plan participants both of whom have many competing priorities. DeHEY & McANDREW is ready to move forward and fully support its clients as they manage through this significant 403(b) plan transformation. We are well prepared for these regulations with robust infrastructure to assist School Districts, Hospitals and all non-profit organizations with whatever needs they have in meeting the regulatory requirements.

DeHEY & McANDREW has pinpointed the most important and most policed provisions, found in the 140 pages of the S. 403(b) Final Regulations. DeHEY & McANDREW has compiled a general list of several responsibilities and look forward to support your organization in the following:

  • Written Plan document
  • Universal Availability Rule
  • Auditing “Orphan Plans” (Plans that are established by a pervious employer.)
  • Testing Non-Discrimination Rules
  • New changes for certain transfers on exchanges of TSA accounts, some effective by September 25, 2007
  • Formal Pension Plan, similar to 401(k), with form and function
  • More Complex Employer Fiduciary Responsibility
  • Monitoring Participants Annual Contribution Limit
  • Choosing the Most Dedicated and Experienced Investment Providers
  • New Payment Periods / Employer Responsibility
  • Explanation and Communication with Participants about Regulatory 403(b) account changes
  • Separate Bookkeeping required for every Vesting Schedule
  • Separate Account or Trust for contributions in excess of Section 415 limitations under S. 403(b), if not no amounts will be qualified for tax deferrals under S. 403(b)
  • Roth Accounts administration with 403(b) accounts
  • Distributions – the plan keeps responsibility for its retirees after retirement
  • Loans and Hardship Withdrawals, including QDRO’s
  • New Catch-Up Rules
  • New Special Limits


For more Information contact DeHEY & McANDREW at (570) 346-9960 or check out our Newsletter Employment Directions with more information on the new Section 403(b) Regulations, as well as current HR issues.

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