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On or before December 31, 2009, tax exempt employers who sponsor Code §403(b) retirement plans (sometimes known as tax-sheltered annuity plans or “TSAs”) need to adopt a written plan document for their 403(b) plans.

Background. Recently issued final IRS regulations governing Code §403(b) retirement plans require that employers adopt written plan documents for their plans, even if the plan has no employer contributions and accepts only voluntary employee contributions. (In other words, even if the plan is a “non-ERISA” arrangement.) The written plan document must include all materials terms and conditions for eligibility, benefits, and contribution limits; the annuity contracts and custodial account agreements available under the plan; the time and form of benefit distributions (in-service and upon termination or retirement); the conditions for transfers and investment contract exchanges; and the employer’s ability to amend or terminate the arrangement.

Ensuring proper documentation. Documents that already contain certain required information may be incorporated by reference, so that may simplify the formal plan document. Employers with plans that make annuity contracts or custodial accounts available from more than one issuer will need to adopt a single plan document to coordinate administration among all issuers. Such employers will also have to enter into information-sharing agreements with each contract issuer and account provider. Particular attention should be paid to ensuring that the particular distribution options and restrictions that apply to each type of annuity contract and custodial account are clearly and accurately reflected in the written plan document.