The 403(b) Pre-approved Plan Program is designed to provide assurance that a 403(b) pre-approved plan document meets Internal Revenue Code Section 403(b) requirements (Revenue Procedure 2013-22). The IRS will accept 403(b) pre-approved plan applications beginning June 28, 2013. These FAQs provide general information and should not be cited as legal authority. Because these answers do not apply to every situation, yours may require additional research. What is a Pre-approved 403(b) Plan? Eligible Plan Sponsors Required Plan Provisions Duties of Plan Sponsors Application Procedures Eligible Adopting Employers and Reliance on Letters Remedial Amendment Period What is a pre-approved 403(b) plan? What types of plans may apply for a pre-approval letter under the 403(b) pre-approved plan program? Under the 403(b) Pre-approved Plan Program: 403(b) prototype plans may apply for an opinion letter, and 403(b) volume submitter plans may apply for an advisory letter, that the form of the plan documents satisfies the requirements of Internal Revenue Code Section 403(b), subject to certain restrictions. What is a 403(b) prototype plan? A defined contribution retirement plan designed to meet the requirements of Internal Revenue Code Section 403(b) that a prototype sponsor makes available for adoption by employers eligible to have 403(b) plans. A 403(b) prototype plan consists of: A basic plan document that contains all of the plan’s nonelective provisions that apply to all adopting eligible employers and that does not have any options or blanks, and An adoption agreement that allows an adopting eligible employer to select among plan design alternatives available under the basic plan document to customize its plan. Although a basic plan document can be used with more than one adoption agreement, an adoption agreement can be used with only one basic plan document. Each basic plan document and adoption agreement pair is considered one separate 403(b) prototype plan, even if there are multiple investment arrangements or vendors under the plan and requires a separate application under the 403(b) Pre-approved Plan Program. A 403(b)(9) retirement income account plan may be either a 403(b) prototype plan or a 403(b) volume submitter plan. It can’t be combined with non-403(b)(9) retirement income accounts and requires a separate basic plan document. A 403(b)(9) retirement income account plan is a type of 403(b) plan available only to certain church-related organizations. The IRS will only review the basic plan document and adoption agreement under the Program. Although an adopting employer may incorporate other documents in the prototype plan by reference (for example, annuity contracts and custodial account agreements), it can’t rely on the plan’s opinion letter regarding the terms incorporated from these other documents. Will the 403(b) pre-approved plan program include both standardized and nonstandardized prototype plans? Yes. 403(b) prototype plans must be either standardized or non-standardized. Whether a 403(b) prototype plan is standardized or non-standardized has an impact on the scope of a plan’s opinion letter and employer reliance on the opinion letter. What is a standardized 403(b) prototype plan? A standardized 403(b) prototype plan allows employee salary deferrals. If it allows other types of contributions, the standardized 403(b) prototype plan must: State they will be made for all eligible employees. Make all benefits, rights, and features of the plan available to all benefiting employees. Have provisions for allocating employer nonelective contributions that meet IRC Section 401(a)(4) design-based safe harbor provisions. Define compensation as required by the Program. What is a nonstandardized 403(b) prototype plan? A non-standardized 403(b) prototype plan is a plan that doesn’t meet the requirements to be a standardized plan. For example, a 403(b) prototype plan that allows the adopting employer to select (in the adoption agreement) a method for allocating nonelective employer contributions that isn't an IRC Section 401(a)(4) design-based safe harbor. What is a 403(b) volume submitter plan? It’s a defined contribution retirement plan that meets IRC Section 403(b) requirements that consists of: a specimen plan, which is a model plan document (as opposed to the actual plan of an employer), and an adoption agreement, if applicable. An eligible employer's actual plan must be substantially similar to the volume submitter plan sponsor's pre-approved specimen plan. A specimen plan may include an adoption agreement but is not required to have one. If the volume submitter plan is designed to include an adoption agreement and more than one adoption agreement may be used with the specimen plan, each specimen plan and adoption agreement pair is considered one separate 403(b) volume submitter plan and requires a separate application under the Program. If an adoption agreement is used for a volume submitter plan, it must satisfy the prototype plan adoption agreement rules. A 403(b)(9) retirement income account plan may be either a 403(b) volume submitter plan or a 403(b) prototype plan. It cannot be combined with non-403(b)(9) retirement income accounts, and thus requires a separate specimen plan. A 403(b)(9) retirement income account plan is a type of 403(b) plan available only to certain church-related organizations. The IRS will only review the specimen plan (and adoption agreement, if included) under the Program. Although an adopting employer may incorporate other documents in the volume submitter plan by reference (for example, annuity contracts or custodial account agreements), it can’t rely on the plan’s advisory letter regarding the terms incorporated from these other documents. Return to top Eligible plan sponsors Who can sponsor a 403(b) prototype plan? An entity can sponsor a 403(b) prototype plan if it both: Has an established place of business in the United States where it can be reached every business day; and Expects at least 15 eligible employers to adopt its 403(b) prototype plan basic plan document(s). However, a church-related organization may sponsor a 403(b) prototype plan designed to be a 403(b)(9) retirement income account plan regardless of how many employers its expects to adopt the plan. Who can sponsor a 403(b) volume submitter specimen plan? An entity can sponsor a 403(b) volume submitter plan if it both: Has an established place of business in the United States where it can be reached every business day; and Expects at least 15 eligible employers to adopt its 403(b) volume submitter specimen document(s). However, a church-related organization may sponsor a 403(b) volume submitter plan designed to be a 403(b)(9) retirement income account plan regardless of how many employers it expects to adopt the plan. Who can be a prototype or volume submitter mass submitter? An entity can be a mass submitter of either a prototype or volume submitter plan if it both: Has an established place of business in the United States where it can be reached during every business day; and Submits opinion or advisory letter applications on behalf of at least 15 prototype sponsors, or at least 15 volume submitter practitioners, each of which is sponsoring on a word-for-word identical basis the same basic plan document or specimen plan. The 15-word-for-word-identical-adopter requirement only needs to be met for one plan of the mass submitter. After it is met for one plan, the mass submitter may submit additional applications for other prototype or volume submitter plans regardless of the number of word-for-word identical adopters of those other plans. An entity can sponsor a plan of a mass submitter if it has an established place of business in the United States where it can be reached every business day and sponsors the plan as either: a word-for-word identical adopter or minor modifier of a mass submitter’s 403(b) prototype plan, or a word-for-word identical adopter or minor modifier of a mass submitter's 403(b) volume submitter plan. To be a word-for-word identical adopter, the entity must sponsor a plan that is identical, on a word-for-word basis, to either a basic plan document or a specimen plan of a mass submitter. To be a minor modifier, the entity must sponsor a plan that contains only minor changes from a basic plan document of a mass submitter, and the changes do not require the IRS to do an in-depth technical review to issue an opinion letter to the plan. Return to top Required plan provisions What provisions must all pre-approved 403(b) plans include? The IRS will only review a prototype’s plan’s basic plan document and adoption agreement, or volume submitter plan document, and will not review provisions contained in investment arrangements or other documents incorporated by reference in the plan document. All 403(b) pre-approved plans must include provisions that: Incorporate by reference the terms of the plan’s investment arrangements (annuity contracts and custodial accounts). The terms must satisfy applicable law and may not have any provisions that are inconsistent with Internal Revenue Code Section 403(b). State that the terms of the pre-approved plan document govern in the event of any conflict between its terms and those of any document incorporated by reference. Contain all of the material terms and conditions for plan eligibility, benefits, applicable limitations, available investment arrangements, and when and how benefits will be distributed. Satisfy the universal availability requirements for employee salary deferral contributions (unless the eligible employer is a church or qualified church-controlled organization. Limit compensation for plan contributions to the IRC Section 401(a)(17) amount (unless the eligible employer is a church or qualified church-controlled organization), but governmental plans may use the special transitional rule for limits on participant’s compensation for governmental plans. Meet IRC Section 401(m) requirements if the plan provides for matching contributions or after-tax employee contributions (unless the plan is a governmental, church or qualified church-controlled organization plan). Govern hardship distributions and other distribution events, loans, plan-to-plan transfers, contract exchanges, contributions and rollovers into the plan, if the plan includes these features. Provide for full and immediate vesting, or a vesting schedule for nonelective employer contributions, except: for a volume submitter plan that isn’t subject to ERISA’s vesting rules, the contributions and earnings can use a vesting schedule at least as rapid as those required by qualified plans under IRC Section 411; the non-vested portion of a participant’s interest must be maintained in a separate account that’s treated as a separate contract governed by IRC Section 403(c) (or other IRC Sections), but as amounts in the separate account become vested, they must be removed from the separate account and treated as amounts held under the 403(b) plan, to the extent permitted); and all non-vested amounts must become vested upon plan termination. Outline how the pre-approved plan sponsor will: amend the plan so that changes in the Internal Revenue Code, regulations, and other guidance are applied to all adopting employers, and inform the adopting employers of any plan amendments, and the discontinuance or abandonment of the plan. Explain that the plan’s appendix: identifies the parties responsible for the plan’s various administrative duties, and lists all of the plan’s annuity contract and custodial accounts vendors (changes to this appendix will not affect an employer’s reliance on the plan’s opinion or advisory letter). What additional provisions must 403(b) prototype plans include? In addition to the required provisions for all pre-approved plans, all 403(b) prototype plans must: Limit total employer and employee contributions to the IRC Section 415 contribution limits (a custodial account and a retirement income account are treated as an annuity contract for these purposes). The plan must also include these related provisions: all 403(b) annuity contracts an employer purchases for a plan participant are treated as one 403(b) annuity contract for IRC Section 415 purposes; if a participant controls the employer who purchased the 403(b) annuity contract on his behalf, the employer must aggregate the 403(b) annuity contract with all of its other defined contribution plans in determining if the limits have been exceeded; the adopting employer must coordinate IRC Section 415 limits among all of its and any related employers’ 403(b) prototype plans (or among all the adopting employer’s 403(b) plans if at least one is a non-prototype plan). Provide that an eligible employer will be considered to have adopted an individually designed plan (and thus will not have reliance on an opinion letter) if the employer: amends any provision of either the basic plan document or the adoption agreement (other than very limited amendments permitted by Revenue Procedure 2013-22), or decides to discontinue participation in the prototype plan sponsor amended plan. What provisions must all adoption agreements of 403(b) prototype plans include? A 403(b) prototype plan’s adoption agreement must: Require that the adopting employer disclose its status as an eligible employer by indicating whether it is: A public school A 501(c)(3) organization A minister’s employer A self-employed minister Require the adopting employer to indicate (for nondiscrimination requirements) whether the plan is: A government plan of a public school A government plan of a 501(c)(3) tax-exempt organization A plan of a church or a qualified church-controlled organization A plan (other than those indicated above) of a 501(c)(3) tax-exempt organization Permit the adopting employer to add overriding plan language as necessary to comply with IRC Section 415 contribution limits when aggregating multiple plans. Contain a dated employer signature line and require the adopting employer to sign (may use an electronic signature): the adoption agreement when it firsts adopts the plan, a new adoption agreement when the plan is restated, and a new signature page if it modifies any prior elections or makes new elections in its adoption agreement. State that it can only be used with the specifically identified basic plan document. Contain a cautionary statement that failure to properly complete the adoption agreement may result in the plan failing to meet the requirements of IRC Section 403(b). Include the plan sponsor’s name, address, and telephone number, or space to include, so the adopting employer may contact the sponsor about the: plan's adopting employer process, plan provisions and their meaning, or opinion letter’s effect. What provisions must adoption agreements of all nonstandardized 403(b) prototype plans include? Nonstandardized prototype plans must state that: The plan must satisfy the nondiscrimination and coverage requirements of IRC Sections 401(a)(4) and 410(b) for nonelective contributions (unless the plan is a government 403(b), church plan, or plan of a qualified church-controlled organization). Adopting employers can’t rely on the plan’s opinion letter for whether the plan satisfies the nondiscrimination and coverage requirements of IRC Sections 401(a)(4) and 410(b). What provisions must be included in a 403(b) pre-approved plan provided by a church? A pre-approved plan intended to be a 403(b)(9) retirement income account provided by a church must: State that the plan is intended to be a 403(b)(9) retirement income account that meets the requirements of the 403(b) final regulations. Include plan provisions that satisfy separate accounting, investment performance, and exclusive benefit requirements of the 403(b) final regulations. If the plan provides a life annuity benefit, satisfy the present value and benefit guarantee requirements of the 403(b) final regulations based on actuarial assumptions stated in the plan document or incorporated by reference. Does the IRS provide sample 403(b) plan language? The IRS has provided sample plan language for: Pre-approved plans - Listing of Required Modification (for Section 403(b) Plans) PDF Public schools 403(b) plans - Revenue Procedure 2007-71 (can be used to draft a 403(b) pre-approved plan). Return to top Duties of plan sponsors What are the duties of a 403(b) pre-approved plan sponsor? 403(b) pre-approved plan sponsors must: Keep a written record of adopting employers and provide the IRS, upon its written request, a list of the employers’ names, addresses and Employer Identification Numbers (unless a church-related organization sponsoring a pre-approved plan intended to be a 403(b)(9) retirement income account). Maintain its pre-approved plan’s approved status by following all Program rules, including: amending the plan by the required deadlines for changes in the Internal Revenue Code, regulations, revenue rulings or any other IRS published guidance that impacts 403(b) plans, applying for a new opinion or advisory letter when required, providing a copy of the plan, all amendments, and the plan’s current opinion or advisory letter to each adopting employer (this may be done electronically), and complying with all required notice procedures. Notify all of the plan’s adopting employers of plan amendments and restatements (this may be done electronically). Notify adopting employers of the need to adopt the plan and any restatements by a required deadline, and that adverse tax consequences could result from a failure to adopt the plan or restatement by a required deadline, or to operate the plan according to the plan amendments. If the plan sponsor determines that an adopting employer's plan may no longer meet the requirements of IRC Section 403(b) and the employer doesn’t or can’t correct the failure under the IRS correction program, the plan sponsor must notify the adopting employer: that the plan may no longer satisfy IRC Section 403(b), that adverse tax consequences may occur, and that the IRS correction program may be available to correct the problem. Can a 403(b) pre-approved plan sponsor abandon its plan? Yes. The sponsor must first inform any adopting eligible employer still using the plan that the: plan is no longer a pre-approved plan, the employer’s plan will become an individually-designed plan (unless the employer adopts another 403(b) pre-approved plan), and employer will not be able to rely on the plan’s advisory or opinion letter if there is any change in the law, regulations, or guidance under IRC Section 403(b). After notifying all such adopting employers, the plan sponsor must notify the IRS in writing that it intends to abandon the plan. The sponsor must also notify the IRS if its 403(b) pre-approved plan is no longer being used by any eligible employer, and it no longer intends to offer the plan for adoption. The notification to the IRS should include the file folder number appearing on the plan’s most recent opinion or advisory letter. By following these procedures, the sponsor is relieved of the 403(b) pre-approved plan sponsor’s duties. What must a 403(b) pre-approved plan sponsor do if the IRS revokes the plan’s opinion or advisory letter? The IRS may revoke an opinion or advisory letter it issued for a 403(b) pre-approved plan that it may have issued in error, or which is not in accord with the IRS’s current views. In general, however, the IRS will not apply the revocation retroactively. A 403(b) pre-approved plan sponsor whose plan’s opinion or advisory letter is revoked must notify all its adopting employers about the revocation. Return to top Application procedures How can a 403(b) plan sponsor apply for an opinion or advisory letter? The IRS will accept applications for opinion or advisory letters for 403(b) pre-approved plans beginning June 28, 2013. The IRS stopped accepting applications on April 30, 2015 with the exception of word-for-word identical adopter and minor modifier applicants of certain mass submitter plans. A 403(b) plan’s opinion or advisory letter application must include all required documents and may include additional documents. Application steps Complete your application package with all required documents and any additional documents that may apply Pay the appropriate user fee based on the user fee schedule Mail your application package to: Internal Revenue Service Attn: Pre-Approved Plans Coordinator Room 5106, Group 7521 P.O. Box 2508 Cincinnati, OH 45201-2508 Any request shipped by Express Mail or a delivery service should be sent to: Internal Revenue Service Attn: Pre-approved Plans Coordinator 550 Main Street Room 5106, Group 7521 Cincinnati, OH 45202 Wait for your application to be assigned to an IRS employee for review Respond to any inquiries from the IRS employee assigned to your case Receive your official IRS opinion or advisory letter See the 403(b) Pre-Approved Plan Program – Apply for a Letter Web page for a list of documents to include with your application. Can the IRS request additional information from a 403(b) pre-approved plan sponsor? The IRS, at its discretion, may request any additional information deemed necessary for it to review a 403(b) pre-approved plan sponsor’s application for an opinion or advisory letter. Can a plan sponsor withdraw its opinion or advisory letter application? Yes. A pre-approved plan sponsor may withdraw its opinion or advisory letter application at any time before the IRS issues the letter by notifying the IRS in writing. The sponsor must also notify each employer that has adopted the plan in writing that it is withdrawing its application. Return to top Eligible adopting employers and reliance on letters Who can adopt a 403(b) prototype or volume submitter specimen plan? Any employer that is eligible to adopt a 403(b) plan, including: Public schools 501(c)(3) tax-exempt organizations Churches Certain self-employed ministers What is an IRS opinion or advisory letter for a 403(b) pre-approved plan? An opinion or advisory letter for a 403(b) pre-approved plan means that the IRS has determined that the pre-approved plan satisfies the requirements of IRC Section 403(b) (these requirements are specifically outlined in the opinion or advisory letter). The IRS will not review and, therefore, an opinion or advisory letter will not cover the terms of any underlying investment agreements (for example, annuity contracts or custodial accounts), or any other ancillary document even if these documents are incorporated into the plan by reference. An IRS opinion or advisory letter issued for a 403(b) pre-approved plan doesn’t cover whether a plan is subject to, or satisfies, the requirements of ERISA. The IRS will not issue opinion or advisory letters for: Any other plan the IRS determines in its discretion is not suitable for an opinion or advisory letter. Plans that incorporate by reference IRC Section 415 limitations or the average contribution percentage test of IRC Section 401(m)(2). Plans that include blanks or fill-in provisions for the adopting employer to complete, unless the plan is designed in such a way to make it impossible for an eligible employer to complete the provisions in manner inconsistent with IRC Section 403(b). Plans grandfathered under Revenue Ruling 82-102 Church defined benefit plans under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) To what extent can an adopting employer rely on a 403(b) prototype plan’s opinion letter? The extent to which an employer who adopts a 403(b) pre-approved plan can rely on the plan’s letter depends on both the: Terms of the plan’s opinion letter Type of employer. Terms of the plan’s opinion letter - Adopting employers should carefully review the 403(b) prototype plan’s opinion letter for the scope of the letter. Type of employer: All employers – Adopting employers may not rely on the letter for whether the plan: satisfies any inherently factual issues (for example, whether the plan satisfied the Internal Revenue Code’s general nondiscrimination and coverage requirements for former employees). meets IRC Section 415 requirements if the adopting employer or any of its related employers maintain another 403(b) plan that covers any of the same participants, unless the other plan is also a 403(b) prototype plan. Certain tax-exempt organizations – an adopting employer (that is not a governmental plan or a plan of a church or qualified church-controlled organization) may rely on the plan’s opinion letter that the form of the plan satisfies IRC Section 403(b) requirements in the following manner. standardized prototype plan - An adopting employer may rely on the plan’s letter for the plan meeting general nondiscrimination and coverage requirements, if: If the plan allows other contributions, all of the employers in the adopting employer’s controlled group are employers eligible to adopt a 403(b) plan. Otherwise, the adopting employer can’t rely on the opinion letter for whether the plan meets the nondiscrimination and coverage requirements for any contributions other than employee salary deferrals. the only contributions under the plan are employee salary deferrals, or nonstandardized prototype plans - an adopting employer of a nonstandardized prototype plan may not rely on the letter for whether contributions other than employee salary deferrals satisfy the Internal Revenue Code’s general nondiscrimination and coverage requirements. Governmental plans and plans of churches and qualified church-controlled organizations - adopting eligible employers may rely on a 403(b) prototype plan’s opinion letter regardless of whether the plan is a standardized or nonstandardized plan. However, the letter is conditioned on the adopting employer’s accurate representations that it’s eligible to adopt a governmental plan, or that it’s a church or qualified church-controlled organization. To what extent can an adopting employer rely on a 403(b) volume submitter plan’s advisory letter? An employer adopting a 403(b) volume submitter specimen plan may rely on a plan’s advisory letter that the plan document satisfies the requirements of IRC Section 403(b) except: If the employer modifies the terms of the approved specimen plan (other than by selecting among permitted options), On the following issues: Whether the plan meets the general nondiscrimination and coverage requirements (unless the plan is a governmental plan or a plan of a church or qualified church-controlled organization). Whether the plan qualifies as a governmental plan or whether the adopting eligible employer is a church or qualified church-controlled organization (the letter is conditioned on the adopting employer’s accurate representations that it’s eligible to adopt a governmental plan, or that it’s a church or qualified church-controlled organization). Issues of an inherently factual nature (for example, whether the plan satisfied the Internal Revenue Code’s general nondiscrimination and coverage requirements for former employees). Whether the plan meets IRC Section 415 requirements if the adopting employer or any of its related employers maintain another 403(b) plan that covers any of the same participants as those in the 403(b) volume submitter plan. Return to top Remedial amendment period How does the 403(b) pre-approved plan program affect a plan's remedial amendment period? By adopting a 403(b) pre-approved plan by the March 31, 2020 deadline (per Revenue Procedure 2017-18), the Program allows an eligible employer to retroactively correct defects in the form of its written 403(b) plan back to the first day of the plan’s remedial amendment period, which is the later of: January 1, 2010, or the plan’s effective date. The employer’s adoption of a pre-approved 403(b) plan that has a favorable opinion or advisory letter automatically corrects any defects in its prior written 403(b) plan but not defects in any documents incorporated by reference in the prior plan. Interim amendments are not required for a plan to be eligible for this remedial amendment period. When will the IRS establish a determination letter program for individually designed 403(b) plans? At this time, the IRS does not anticipate opening a determination letter program for individually designed 403(b) plans. Return to top Related 403(b) Pre Approved Plan Program 403(b) Tax Sheltered Annuity Plans
