IRS Issues Guidelines for Opinion and Advisory Letters for 403(b) Plans
On March 28, 2013, the Internal Revenue Service (IRS) issued Revenue Procedure 2013-22, which set forth the procedures for the IRS to issue opinions and advisory letters for 403(b) prototype plans and 403(b) volume submitter plans.
In 2007, the IRS issued regulations requiring 403(b) plans to have a written plan document in place by December 31, 2009, with an effective date of January 1, 2009. However, the IRS did not have a program in place for the issuance of opinion and advisory letters regarding the acceptability of the form of a plan under code section 403(b).
Revenue Procedure 2013-22 establishes a program for the pre-approval of 403(b) plans. The program offers employers that maintain a 403(b) plan an alternative to adopting an individually designed plan in order to satisfy the written plan requirement of the 2007 regulations. Under this program, the IRS will issue an opinion or advisory letter as to whether the form of a 403(b) prototype plan or volume submitter plan meets the requirements of section 403(b). An employer may satisfy the written plan requirement and obtain assurance that its plan meets the requirements of section 403(b) by adopting a plan that has received an opinion or advisory letter under this program.
At this time, there is no program for employers to receive a determination letter for their 403(b) plan. If an employer adopts a pre-approved 403(b) plan, they will not be able to apply for an individual determination letter for the plan when that program becomes available.
Types of 403(b) prototype plans
There are two types of 403(b) prototype plans under this revenue procedure, which are a “standardized plan” and a “non-standardized plan.”
A standardized plan must satisfy one of the design-based safe harbors with respect to any employer non-elective contributions (other than matching contributions) under the plan. A non-standardized plan is a plan that is not standardized. An employer that adopts a standardized plan can rely on the opinion letter for the plan.
An employer that adopts a non-standardized plan can rely on the opinion letter for the plan if the plan is a governmental plan or the employer is a church or a qualified church-controlled organization. In all other cases, an employer that adopts a non-standardized plan can rely on the opinion letter for the plan, except with respect to whether the plan satisfies the nondiscrimination requirements of section 401(a)(4) and 410(b) relating to contributions under the plan other than elective deferrals.
403(b) volume submitter plans may apply for an advisory letter that the 403(b) volume submitter specimen plan satisfies the requirements of section 403(b). An employer that adopts 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, and except with respect to the requirements of section 401(a)(4) and 410(b), unless those requirements do not apply to the plan because, for example, the only contributions under the plan are elective deferrals.
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Author:Lisa Galinsky, CPA, CVA | [email protected]
The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals for your plan’s individual facts and circumstances.