Revised Regulations Concerning Section 403(b) Tax-Sheltered Annuity Contracts; Correction, 54351-54352 [E7-18809]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 72, Number 185 (Tuesday, September 25, 2007)]
[Rules and Regulations]
[Pages 54351-54352]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-18809]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 54, and 602

[TD 9340]
RIN 1545-BB64


Revised Regulations Concerning Section 403(b) Tax-Sheltered 
Annuity Contracts; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendments.

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SUMMARY: This document contains corrections to final regulations (TD 
9340) that were published in the Federal Register on Thursday, July 26, 
2007 (72 FR 41128) providing updated guidance on section 403(b) 
contracts of public schools and tax-exempt organizations described in 
section 501(c)(3). These regulations will affect sponsors of section 
403(b) contracts, administrators, participants, and beneficiaries.

DATES: The correction is effective September 25, 2007.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, John 
Tolleris at (202) 622-6060; concerning the regulations as applied to 
church-related entities, Robert Architect at (202) 283-9634 (not toll-
free numbers).

SUPPLEMENTARY INFORMATION:

Background

    The final regulations that are the subject of this correction are 
under section 403(b) of the Internal Revenue Code.

Need for Correction

    As published, final regulations (TD 9340) contain errors that may 
prove to be misleading and are in need of clarification.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 54

    Excise taxes, Pensions, Reporting and recording requirements.

26 CFR Part 602

    Reporting and recordkeeping requirements.

Correction of Publication

0
Accordingly, 26 CFR parts 1, 54, and 602 are corrected by making the 
following correcting amendments:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read, in 
part, as follows:

    Authority: 26 U.S.C. 7805 * * *


0
Par. 2. Section 1.403(b)-2 is amended by revising paragraph 
(b)(8)(i)(A), paragraph (b)(9), second sentence, and paragraph (b)(11), 
fourth sentence, to read as follows:


Sec.  1.403(b)-2  Definitions.

* * * * *
    (b) * * *
    (8) * * *
    (i) * * *
    (A) A State, but only with respect to an employee of the State 
performing services for a public school;
* * * * *
    (9) * * * Subject to any rules in Sec.  1.403(b)-1, this section, 
and Sec. Sec.  1.403(b)-3 through 1.403(b)-11 that are specifically 
applicable to ministers, an employee also includes a minister described 
in section 414(e)(5)(A) when performing services in the exercise of his 
or her ministry.
* * * * *
    (11) * * * Includible compensation also includes any elective 
deferral or other amount contributed or deferred by the eligible 
employer at the election of

[[Page 54352]]

the employee that would be includible in the gross income of the 
employee but for the rules of sections 125, 132(f)(4), 402(e)(2), 
402(h)(1)(B), 402(k), or 457(b). * * *
* * * * *

0
Par. 3. Section 1.403(b)-3 is amended by revising paragraph (b)(3)(i), 
last sentence, paragraph (c)(2), last sentence, and paragraph 
(d)(1)(ii), last sentence, to read as follows:


Sec.  1.403-3  Exclusion for contributions to purchase section 403(b) 
contracts.

* * * * *
    (b) * * *
    (3) * * *
    (i) * * * However, if a plan contains any optional provisions, the 
optional provisions must meet, in both form and operation, the relevant 
requirements under section 403(b), this section, and Sec. Sec.  
1.403(b)-4 through 1.403(b)-11.
* * * * *
    (c) * * *
    (2) * * * Similarly, a designated Roth account under a section 
403(b) plan is subject to the rules of sections 401(a)(9)(A) and (B) 
and Sec.  1.403(b)-6(e).
* * * * *
    (d) * * *
    (1) * * *
    (ii) * * * However, any failure that is not an operational failure 
adversely affects all contracts issued under the plan, including: a 
failure to have contracts issued pursuant to a written defined 
contribution plan which, in form, satisfies the requirements of Sec.  
1.403(b)-1, Sec.  1.403(b)-2, this section, and Sec. Sec.  1.403(b)-4 
through 1.403(b)-11 (a written plan failure); a nondiscrimination 
failure; or an employer eligibility failure.
* * * * *

0
Par. 4. Section 1.403(b)-4 is amended by revising paragraph (b)(1), 
third sentence, paragraph (c)(3)( i)(B)(2), and paragraph (e)(7), 
second sentence, to read as follows:


Sec.  1.403(b)-4  Contribution limitations.

* * * * *
    (b) * * *
    (1) * * * For purposes of section 415, contributions made for a 
participant are aggregated to the extent applicable under sections 
414(b), (c), (m), (n), and (o). * * *
* * * * *
    (c) * * *
    (3) * * *
    (i) * * *
    (B) * * *
    (2) The total elective deferrals described in section 
402(g)(7)(A)(ii) made for the qualified employee by the qualified 
organization for prior years; or
* * * * *
    (e) * * *
    (7) * * * In such a case, there is first taken into account his or 
her service during the annual work period for which the last year of 
service's includible compensation is being determined; then there is 
taken into account his or her service during his or her next preceding 
annual work period based on whole months; and so forth until the 
employee's service equals, in the aggregate, one year of service.
* * * * *

0
Par. 5. Section 1.403(b)-6 is amended by revising paragraph (e)(3) and 
paragraph (e)(5), last sentence, to read as follows:


Sec.  1.403(b)-6  Timing of distributions and benefits.

* * * * *
    (e) * * *
    (3) * * * The required beginning date for purposes of section 
403(b)(10) is April 1 of the calendar year following the later of the 
calendar year in which the employee attains age 70\1/2\ or the calendar 
year in which the employee retires from employment with the employer 
maintaining the plan. However, for any section 403(b) contract that is 
not part of a governmental plan or church plan, the required beginning 
date for a 5-percent owner is April 1 of the calendar year following 
the calendar year in which the employee attains age 70\1/2\.
* * * * *
    (5) * * * See also Sec.  1.403(b)-9(a)(5) for additional rules 
relating to annuities payable from a retirement income account).
* * * * *

0
Par. 6. Section 1.403(b)-11 is amended by revising paragraph (c)(2) to 
read as follows:


Sec.  1.403(b)-11  Applicable dates.

* * * * *
    (c) * * *
    (2) In the case of a loan or other extension of credit to the 
employer that was entered into under a retirement income account before 
July 26, 2007, the plan does not fail to satisfy Sec.  1.403(b)-
9(a)(2)(i)(C) on account of the loan or other extension of credit if 
the plan takes reasonable steps to eliminate the loan or other 
extension of credit to the employer before the applicable date for 
Sec.  1.403(b)-9(a)(2) or as promptly as practical thereafter 
(including taking steps after July 26, 2007 and before the applicable 
date).
* * * * *

0
Par. 7. Section 1.414(c)-5 is amended by revising paragraph (g) Example 
3.(i), first sentence, to read as follows:


Sec.  1.414(c)-5  Certain tax-exempt organizations.

* * * * *
    (g) * * *

    Example 3. * * *
    (i) * * * Organizations O and P are each tax-exempt 
organizations under section 501(c)(3). * * *
* * * * *

LaNita Van Dyke,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel (Procedure and Administration).
 [FR Doc. E7-18809 Filed 9-24-07; 8:45 am]
BILLING CODE 4830-01-P