IRS establishes program for pre-approval of 403(b) plans

 

The IRS has issued a revenue procedure establishing a program for the pre-approval of 403(b) plans. Under this program, the IRS will issue an opinion or advisory letter as to whether the form of a 403(b) prototype plan or 403(b) volume submitter plan meets the requirements of Code Sec. 403(b).

An employer may satisfy the written plan requirement of final regulations adopted in 2007 and obtain assurance that its plan meets the requirements of Code Sec. 403(b) by adopting a plan that has received an opinion or advisory letter. The IRS will accept applications for opinion and advisory letters for 403(b) pre-approved plans under the new program beginning June 28, 2013.

In the revenue procedure, the IRS defines the two types of pre-approved plans, prototype and volume submitter plans, and lists required provisions for each. The IRS also addresses the duties of a pre-approved plan sponsor, the scope of an opinion or advisory letter, employer reliance on such letters, maintenance by the plan of approved status, application for letters, withdrawal of an application, abandonment of sponsorship of a plan, revocation, and retroactive remedial amendment of a plan.
No 403(b) determination letter program established

Although there are similarities between this new program and Rev. Proc. 2011-49, which applies to qualified plans under Code Sec. 401(a), the IRS noted that there are differences between the two programs. Under the pre-approved plan program for qualified plans, adopting employers may be able to obtain individual determination letters under certain circumstances. However, the IRS makes it clear that it is not establishing a determination letter program for 403(b) plans at this time and an employer who adopts a pre-approved 403(b) plan will not be able to apply for an individual determination letter for the plan.

Requirements for prototype 403(b) plans

The revenue procedure provides for two forms of 403(b) prototype plans: the “standardized plan” and the “nonstandardized plan.” An eligible employer that adopts a standardized plan generally can rely directly on the opinion letter for the plan. An eligible employer that adopts a nonstandardized plan generally can rely directly on the opinion letter for the plan if the plan is a governmental plan or the employer is a church or qualified church-controlled organization. In all other cases, an eligible employer that adopts a nonstandardized plan generally can rely directly on the opinion letter for the plan except with respect to whether the plan satisfies the nondiscrimination requirements of Code Secs. 401(a)(4) and 410(b) relating to contributions under the plan other than elective deferrals.

Requirements for volume submitter 403(b) plans

A 403(b) volume submitter plan refers to either a specimen 403(b) plan of a volume submitter practitioner or a plan of a client of the volume submitter practitioner that is substantially similar to the volume submitter’s approved specimen plan.

A practitioner may apply for an advisory letter that a 403(b) volume submitter specimen plan (that is, a sample plan of the practitioner rather than an employer’s plan) satisfies the requirements of Code Sec. 403(b). A 403(b) volume submitter plan is not required to have an adoption agreement, but may have one.

An adopting employer of a 403(b) volume submitter plan can rely directly on the advisory letter for the approved specimen plan, except to the extent that the employer’s plan is not identical to the approved specimen plan, disregarding any differences attributable solely to the employer’s choices of options provided under the specimen plan, and except with respect to the requirements of Code Secs. 401(a)(4) and 410(b) (unless those requirements do not apply to the plan, for example, because the only contributions under the plan are elective deferrals).

Applying for an opinion or advisory letter

As noted, the IRS will accept applications for opinion and advisory letters for 403(b) pre-approved plans beginning June 28, 2013. A separate application is required for each adoption agreement that is offered for adoption by a prototype sponsor and each specimen plan of a volume submitter.

An application for an opinion letter for a 403(b) prototype plan may be filed by a prototype sponsor, by a mass submitter with respect to its mass submitter plan, or by a mass submitter on behalf of a word-for-word identical adopter or minor modifier of the mass submitter’s plan. An application for an advisory letter for a 403(b) volume submitter specimen plan may be filed by a volume submitter practitioner, by a mass submitter with respect to its mass submitter plan, or by a mass submitter on behalf of a word-for-word identical adopter of the mass submitter’s plan.

The IRS said that it is developing forms for these applications and will issue an announcement when the forms become available. Until then, an application for an opinion or advisory letter for a 403(b) prototype or specimen plan may be made by submitting the plan to the IRS along with a completed and signed “Application for Approval of §403(b) Pre-approved Plan,” as provided in the appendix to the revenue procedure.

Source: IRS Rev. Proc. 2013-22.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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