IRS Offers Assurance until 403(b) Prototype Program Begins
The Internal Revenue Service (IRS) is offering a way for 403(b) plan sponsors to feel secure, until the new 403(b) Prototype Program begins, that their plan documents will comply with new regulations.
In Announcement 2009-89, the agency said that within the next few months, it expects to publish a revenue procedure for obtaining an opinion letter that the form of a prototype or other “pre-approved Plan” meets the requirements of §403(b) of the Internal Revenue Code (see “403(b) Prototype Likely to Allow for Vesting Schedules“), and subsequently, it intends to publish a revenue procedure for obtaining an individual determination letter for a §403(b) plan.
Announcement 2009-89 provides for a remedial amendment period and reliance for employers that either adopt a pre-approved plan with a favorable opinion letter or apply for an individual determination letter when available.
In other words, for plans adopted on or before the December 31, 2009, deadline, if the employer sponsoring the plan either adopts a pre-approved plan that has received a favorable opinion letter from the IRS or applies for an individual determination letter when available, the employer will have a remedial amendment period in which to amend the plan to correct any form defects retroactive to January 1, 2010. In addition, the employer will have reliance, beginning January 1, 2010, that the form of its written plan satisfies the requirements of § 403(b) and the regulations, provided that, during the remedial amendment period, the pre-approved plan is adopted retroactive to January 1, 2010, or the plan is amended to correct any defects in the form of the plan retroactive to January 1, 2010.
The announcement also said an employer that first establishes a § 403(b) plan after December 31, 2009, by adopting a written plan intended to satisfy the requirements of § 403(b) and the regulations will also have reliance beginning on the effective date of the plan, provided the employer either adopts a pre-approved plan with a favorable opinion letter or applies for an individual determination letter and corrects any defects in the form of the plan retroactive to the plan’s effective date.
According to the announcement, the upcoming revenue procedures will include this remedial amendment provision and will address the time-frames for adopting a pre-approved plan or applying for a determination letter and other details regarding the remedial amendment period.
Pending publication of the additional guidance, the IRS said, employers should not request ruling or determination letters on the form of their §403(b) plans at this time.