Tax News

CCH (cch.taxgroup.com) reports:

  The IRS released sample 403(b) prototype plan language on April 14 and along with a draft revenue procedure describing proposed procedures for obtaining 403(b) opinion letters. The 403(b) language is based on language previously developed for other IRS prototype plan programs, as well as model public school 403(b) plan language in
Rev. Proc. 2007-71, I.R.B. 2007-51, 1184.

Written Plan Requirement

 
Code Sec. 403(b) allows employers to make tax-free contributions on behalf of their employees to annuities contracts, custodial accounts exclusively invested in mutual fund shares, and church retirement income accounts. The IRS issued comprehensive and final Code Sec. 403(b) regulations in 2007 (T.D. 9340, I.R.B. 2007-36, 487). The final regulations require these arrangements to be maintained under a written plan.

  In 2007, the Service released model language for public school
403(b) plans (Rev. Proc. 2007-71). In late 2008, the IRS announced that the January 1, 2009, deadline for sponsors of 403(b) plans to comply with the written plan requirement is postponed until January 1, 2010 (IR-2008-140, Notice 2009-3, I.R.B. 2009-2, 250; TAXDAY 2008/12/12, I.4).

Prototype Program

  A 403(b) prototype plan is a defined contribution plan that is intended to satisfy the requirements of 403(b) and is made available by a prototype sponsor for adoption by eligible employers, the IRS explained. The 403(b) prototype program will generally operate in the same manner as the current Master and Prototype Program for plans qualified under Code Sec. 401(a). Sponsors of
403(b) prototype plans will submit a plan document to the IRS for review and if the plan satisfies the requirements of Code Sec. 403(b), the Service will issue a favorable opinion letter. Sponsors may offer the approved plan document for adoption by employers.

  The sample plan provisions address, among other things, eligibility and participation, contributions, distributions, and plan terminations. Part I contains sample plan provisions for 403(b) prototype plans that are limited to elective deferrals. Part II includes additional sample provisions for 403(b) prototype plans that accept contributions other than elective deferrals.

Opinion Letters

  The IRS indicated that it will only address the terms of the basic plan document and adoption agreement in an opinion letter. An opinion letter for a 403(b) prototype plan cannot be relied on with respect to whether a plan is subject to the requirements of Title I of ERISA. Certain 403(b) plans may be covered by Title I of ERISA. The IRS does not have jurisdiction over Title I of ERISA.

  The opinion letter program, the Service predicted, will allow employee benefits practitioners and financial organizations, such as mutual funds and insurance companies, to obtain advance approval of the form of a 403(b) prototype plan. The IRS will begin accepting applications for opinion letters for
403(b) prototype plans when the draft revenue procedure is finalized.

Comments Requested

  The IRS is requesting comments on the sample 403(b) prototype plan provisions by June 1, 2009. The IRS is also asking sponsors to advise the Service if they intend to apply for an opinion letter. Additionally, the Service requests mass submitters to estimate how many opinion letter applications they will submit on behalf of sponsors.

  By George L. Yaksick, Jr., CCH News Staff

Announcement 2009-34, 2009FED ¶46,336

Code Sec. 403( Prototype Plans Sample Plan Provisions and Information Package

Other References:

 
Code Sec. 403

  CCH Reference - 2009FED ¶18,282.077

  CCH Reference - 2009FED ¶18,282.11

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