In its February 11, 2011, edition of Employee Plan News, the Internal Revenue Service (the Service) reiterated its process for resolving situations where section 403(b) programs have been adopted or operated by an employer that is not a tax-exempt or educational organization permitted to sponsor that program. This situation can arise, for example, where (i) an ineligible employer mistakenly adopts a section 403(b) plan in the first instance, or (ii) an eligible employer changes or loses its section 501(c)(3) status and contributions are made to the section 403(b) program for a period when the employer is not an eligible sponsor. In this latter case, if contributions cease at or before the time the employer ceases to be an eligible employer, the following resolution procedure is not required. Treas. Reg. §1.403(b)-10(a)(2).

In general, if (i) resolution is required and (ii) there is no notice of or ongoing Employee Plans, Exempt Organization or criminal examination of the employer or plan by the Service, the employer should....