We’re still a few weeks off from the due date, but it’s safe to say that the Internal Revenue Service is gearing up to fit 403(b) plan regulation in line with the 2001 tax law changes. Sources say this will be the first time that the IRS has made sweeping comprehensive changes to these plan rules since 1964.

"The 403(b) [market] has operated without any real formal guidance for dozens of years," said Renee Wilder, executive director of the National Tax-Sheltered Accounts Association, a trade organization for producers who deal with 403(b) plans. "The IRS is in the process of coming out with regulations that will give guidance as to how you should properly administer 403(b) plans. There is some speculation that they would be significant."

She continued, "A lot of times people had to make assumptions. Now we will have some clear direction as to how to appropriately manage retirement funds."

It is not yet known what exactly the IRS will be proposing. However, "once updated, the regulations [will give] 403(b) plan sponsors a better guideposts to IRS expectations, particularly valuable in the event of an IRS audit," said Linda Segal Blinn, national director of technical services at ING, who said the IRS has publicly spoken about the coming changes at presentations in March.

Segal Blinn added that the IRS had included updating the regulations in this year’s fiscal budget, which ends on June 30. Yet the proposals will most likely be unveiled in July.

An IRS spokesperson did not return calls for comment.


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