If your organization sponsors a 403(b) retirement plan, there’s a crucial Internal Revenue Service (IRS) deadline you can’t afford to ignore. The IRS has announced a plan restatement deadline for 403(b) plans. Failure to act within this window could expose your organization to compliance risks and penalties. If you sponsor a non-profit, public school district, or government entity using a pre-approved plan document, timely restatement of your 403(b) plan is essential.
What is a 403(b) Restatement?
Most employers utilize a vendor to provide their plan documents. These are generally called “pre-approved” plan documents. They are called “pre-approved” because the vendor files the proposed plan document with the IRS for approval prior to the document being offered to customers. These vendors then handle all amendments as they are required by sending out supplements to their customers in a timely manner.
The IRS now requires that 403(b) pre-approved plans be restated in a manner similar to the process long available for 401(k) plans. Every several years, plans will need to be restated to new “pre-approved” documents. The IRS uses this process to ensure that all plan documents are up to date for regulatory and legal compliance. The current deadline for pre-approved 403(b) plan restatements is December 31, 2026.
However, if you have a plan that has been individually designed (i.e., drafted to be 100% unique to your company rather than choosing from a list of pre-approved options), you may have a longer amendment period. This is because an individually designed plan does not have to follow the pre-approved plan restatement deadline but instead follow the generally applicable amendment deadline.
Individually designed plans that are collectively bargained plans of 501(c)(3) tax-exempt organizations have until December 31, 2028, to amend. An individually designed 403(b) plan maintained by a public school has a deadline of December 31, 2029. Note that any 403(b) plan that is individually designed but not sponsored by one of the above-discussed entity types must meet the December 31, 2026, deadline. Even with an extended deadline, it is recommended that all individually designed plans be amended soon after administrative decisions have been made to avoid any compliance issues that may arise from a delay.
Why Restatements/Amendments Are Necessary
Many 403(b) plan documents, especially older or individually designed plans, may not reflect recent law changes such as:
- SECURE Act and SECURE 2.0 updates (e.g., required minimum distribution age changes, long-term part-time employee eligibility)
- CARES Act provisions related to COVID-19 relief
- Updates to hardship distribution rules and loan provisions
- Correction of prior document defects or omissions
Even plans that are operating properly in practice could be considered out of compliance if the written document is outdated or lacks required provisions by the amendment deadline.
Nonprofits and Governmental Employers Must Prioritize This Restatement
Organizations in the nonprofit and public sectors often face resource and staffing constraints, but they still have fiduciary and compliance obligations. Timely action is critical for several reasons:
1. Avoid IRS Sanctions
A timely amendment can allow for retroactive correction, but once the deadline passes, any non-compliant plan could face penalties or even disqualification.
2. Ensure Operational and Document Alignment
If your plan operations and documents don't match, your organization could be considered non-compliant, even if participants aren’t directly harmed.
3. Protect Employee Benefits
Keeping the plan updated protects employees’ retirement benefits and reinforces participant trust in the plan’s governance.
4. Reduce Administrative Risk
Having a compliant plan document will simplify future amendments and reduce IRS audit risk.
Next Steps for Plan Sponsors
1. Review Your Current 403(b) Document
Determine whether your plan is using a pre-approved or individually designed document and when it was last updated.
2. Coordinate with Vendors and Recordkeepers
Ensure operational procedures align with the document’s terms and implement any new provisions that impact plan administration.
3. Consult with Legal Counsel
Most document providers are offering updated pre-approved versions. Start the amendment process early to avoid a last-minute rush. Individually designed plans will need more review and should be started sooner rather than later to avoid any last-minute issues.
Conclusion
Restating your 403(b) plans before the December 31, 2026, deadline is not just a legal obligation; it is a proactive step to protect your organization and employees. Don’t wait until it is too late. Start reviewing your plan today and ensure you’re on track for compliance before the window closes. If you have any questions about the compliance or amendments for your 403(b) plans, please contact any of Bricker Graydon’s employee benefits team.
