No plans to establish determination letter program for individually designed 403(b) plans: IRS official

The new 403(b) pre-approved plan program has no mechanism for providing opinion and advisory letters to plan sponsors of individually designed 403(b) plans, said IRS officials during a July 28, 2014 IRS phone forum on the pre-approved 403(b) plan program. Nor is the IRS planning to establish a determination letter program for individually designed 403(b) plans, said Sherri Morris, tax law specialist, IRS Employee Plans (EP), technical group. However, employers are allowed to adopt individually designed 403(b) plans, and those plans still have a remedial amendment period, she clarified. But there is no letter that sponsors of individually designed plans can rely upon for corrections made during the remedial amendment period, unless the plan is restated as a pre-approved plan by the required deadline.

Final regulations issued in 2007 required sponsors of 403(b) retirement plans to have a written plan document that specifies certain terms, such as eligibility for the plan and benefits under the plan, in place by January 1, 2009. Notice 2009-3 provided transition relief that extended the deadline until the end of 2009. Rev. Proc. 2013-22 established the 403(b) pre-approved plan program, through which regular submitters and mass submitters of 403(b) prototype plans or 403(b) volume submitter plans may obtain an opinion or advisory letter. The program is meant to provide plan sponsors with some assurance that their plan document is compliant. This should make it easier for plan sponsors to administer the plans in the future, Morris explained.

Rev. Proc. 2014-28 relaxed several of the requirements for pre-approved plan sponsors and mass submitters applying for opinion or advisory letters, Morris said. First, the IRS extended the submission deadline from April 30, 2014, to April 30, 2015. Second, it reduced the number of eligible employers required to adopt the basic plan document of a qualified pre-approved plan sponsor’s prototype or volume submitter specimen plan from 30 to 15. Similarly, the IRS reduced the number of prototype sponsors or volume submitters required for mass submitters to submit applications for opinion or advisor letters on a 403(b) pre-approved plan document or specimen plan from 30 to 15. Finally, the guidance reduced the number of word-for-word identical plan adopters whose applications for opinion or advisory letters must accompany a mass submitter’s initial submission from 30 to 15.

Effect of Windsor

Morris also discussed the effect of the U.S. Supreme Court’s decision in United States v. Windsor. The Windsor decision invalidated Section 3 of the 1996 Defense of Marriage Act (DOMA), which had provided that, in interpreting any federal law, a “marriage” was limited to a “legal union of one man and one woman as husband and wife” and a “spouse” was only “a person of the opposite sex who is a husband or a wife.” The IRS reflected the Windsor holding by issuing the Rev. Rul. 2013-17, which treated same-sex couples as married for all federal tax purposes where marriage is a factor.

Essentially, Morris said, the rules of Rev. Proc. 2013-17 apply for all tax purposes, which includes the federal tax rules for 403(b) plans. She explained this means that a 403(b) plan must recognize a same-sex marriage validly entered into on or after September 16, 2013, in a state that recognizes same-sex marriages. The 403(b) plan must recognize the marriage as valid, whether or not the marriage is recognized under the laws of the state in which the plan participant is domiciled.

Morris clarified that 403(b) plans do not share the same remedial amendment period with 401(a) plans. The deadline to make any necessary amendments to make a 401(a) plan compliant with Windsor is December 31, 2014. The deadline to make post-Windsor amendments to 403(b) plans, however, is the deadline specified in Section 21 of Rev. Proc. 2013-22. In other words, the general deadline for adopting a Windsor amendment to a 403(b) plan is the expiration of the pre-approved plan remedial amendment period.

Source: IRS phone forum, July 28, 2014.
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