IRS audit guidelines for 403(b) plans

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These guidelines provide guidance on how to examine a plan described in Internal Revenue Code § 403(b) (a "403(b) plan"). Section I defines a 403(b) plan and provides a technical overview and historical background of 403(b) plans. Section II discusses the types of employers eligible to maintain a 403(b) plan. Section III describes the various funding vehicles for 403(b) plans. Section IV addresses the requirements of salary reduction contributions. Section V addresses the contribution limits applicable to 403(b) plans. Section VI discusses the applicable nondiscrimination rules. Sections VII through IX address distributions from a 403(b) plan. Section X provides a list of possible defects in a 403(b) plan or annuity contract and resulting tax consequences. Finally, section XI is a glossary of terms.

These guidelines address only employee plans issues. They are intended to assist the employee plans specialist in examining a plan. They are not intended to be all-inclusive. Given the highly technical requirements of 403(b) plans, the agent may need to consult the Code and federal Income Tax Regulations for further development of a particular issue. Accordingly, cites are provided where appropriate. These guidelines are designed to help the examining specialist key in on the issues that should be raised in a particular plan. It is not expected that every issue raised in the guidelines will be relevant or should be raised in every examination. The techniques identified may be modified based on the actual examination issues encountered. Given the purpose of these guidelines, they cannot be, nor are they intended to be, a precedential or comprehensive statement of the legal position of the Service on the issues covered. They are not to be relied on or cited as authority by taxpayers. They are subject to change in accordance with future developments in the law.

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