Starting with the 2009 IRS Form 5500, sponsors of 403(b) plans are required to begin filing on their plans.  One of the main concerns of 403(b) plan sponsors was that under the now-obsolete IRS Notice 90-24, plan participants could individually invest their 403(b) funds in custodial or annuity contracts.  The 5500 form requires a plan sponsor to collect all financial information on plan assets, and employers were concerned that they would be unable to collect and report this information from a large number of unrelated financial and insurance institutions holding individual 403(b) accounts on the requisite Schedule H or I of the 5500.

Now however, under IRS Field Assistance Bulletin (FAB) 2009-2, a plan sponsor of a 403(b) plan gets some relief from the financial reporting requirement if a number of conditions are met relating to these individual contracts:

1) the contract or account was issued to a current or former employee before January 1, 2009;

2) the employer ceased to have any obligation to make contributions (including employee salary reduction contributions), and in fact ceased making contributions to the contract or account before January 1, 2009;

3) all of the rights and benefits under the contract or account are legally enforceable against the insurer or custodian by the individual owner of the contract or account without any involvement by the employer; and

4) the individual owner of the contract is fully vested in the contract or account.

As long as all four conditions are met, the 403(b) plan sponsor is not required to include these individual accounts on the 5500 report.  This is indeed good news.