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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
The IRS has issued a draft revenue procedure that contains the procedures by which plan sponsors may obtain opinion letters for prototype 403(b) plans. The IRS has also posted proposed sample plan language for drafting 403(b) prototype plans on its website. Comments are requested about the draft revenue procedure and sample plan language, and about any other aspect of the 403(b) prototype plan program in general.
Written plan required by December 31, 2009
Under Code Sec. 403(b) final regulations, sponsors of 403(b) plans were generally required to have written plans in place by January 1, 2009. In Notice 2009-3, the IRS provided that 403(b) plans would not be treated as having failed to satisfy Code Sec. 403(b) or the final regulations during the 2009 calendar year if, among other things, the plan sponsors had adopted a written plan by December 31, 2009 that was intended to comply with the statute and the final regulations effective January 1, 2009.
Draft sample plan language
The draft sample plan language (www.irs.gov/pub/irs-tege/draft_Irm_403b_prototypes.pdf) is based on language from other existing IRS prototype plan programs and on Rev. Proc. 2007-71. Rev. Proc. 2007-71 provides model plan language that can be used by public schools to adopt written 403(b) plans or amend existing 403(b) plans to reflect the requirements of Code Sec. 403(b) and the final regulations, and can be used by other eligible employers as sample plan language to comply with the final regulations. The IRS explains that Rev. Proc. 2007-71 is not modified by the draft revenue procedure. Therefore, absent future notice, public schools and other eligible employers may continue to use the model language in Rev. Proc. 2007-71.
403(b) opinion letter program
To promote compliance with Code Sec. 403(b) and the regulations, the IRS is establishing an opinion letter program for 403(b) prototype plans. The requirements of the program in the draft revenue procedure will be similar to the existing opinion letter program for master and prototype plans qualified under Code Sec. 401(a) (see IRS Rev. Proc. 2005-16, CCH Pension Plan Guide ¶17,299R-58 ), except for differences concerning Code Sec. 403(b) requirements. This program will allow plan sponsors to obtain advance approval of the form of the 403(b) prototype plans and eligible employers to adopt the pre-approved prototype plans. After considering any comments received, the IRS will announce the date it will start accepting applications for these opinion letters when the revenue procedure is finalized. The IRS intends in the future to establish a determination letter program that will allow eligible employers to obtain determination letters for individually designed 403(b) plans.
Highlights of the program
An eligible 403(b) prototype plan sponsor is any company, firm, or individual that expects at least 30 eligible employers to adopt the prototype plan’s basic plan documents. A mass submitter is any party that submits opinion letter applications for at least 30 prototype sponsors that have adopted, word-for-word, the same basic plan document.
An eligible employer may rely on a favorable opinion letter if the plan is a standardized plan and either: (1) the only allowable contributions are elective deferrals, or (2) all of the employers in the adopting employer’s controlled group are eligible employers. An adopting eligible employer may not rely on the opinion letter as to whether contributions (other than elective deferrals) satisfy Code Sec. 401(a)(4) and Code Sec. 410(b) if either: (1) the plan is not standardized, or (2) the plan permits contributions other than elective deferrals and the adopting eligible employers’ controlled group includes an employer that is not an eligible employer. However, the adopting eligible employer can request a determination letter (when a 403(b) plan determination letter program is available) to obtain reliance for Code Sec. 401(a)(4) and Code Sec. 410(b). Governmental plans and nonelecting church plans are not subject to these requirements and, thus, may rely on a favorable opinion letter without regard to the form of the plan.
The IRS will not review any annuity contracts or custodial accounts under the plans. The prototype plan’s basic plan document and adoption agreement must satisfy the requirements of the Code and regulations, and must override any contract or account terms that are inconsistent with the plan.
As discussed in Notice 2009-3, a retroactive remedial amendment will be provided for years after 2009 that will allow an eligible employer to retroactively correct defects in the written 403(b) plan by timely adopting an approved 403(b) prototype plan by a date that will be announced in the future (no earlier than March 15, 2010) or by timely amending the plan and submitting a request for a determination letter (when the determination letter program is available). The plan must be amended retroactive to the first day of the plan’s remedial amendment period. For this purpose, “the first day of the plan’s remedial amendment period” will mean the later of January 1, 2010, or the effective date of the plan. Future guidance will specify the date(s) for timely adoption and for timely amendment and submission.
The IRS will not issue opinion letters for: (1) TEFRA church defined benefit plans; (2) plans that include provisions applicable only to churches, qualified church-controlled organizations, church-related organizations, or ministers; or (3) plans that provide graduated vesting.
An opinion letter will provide reliance only for Title II of ERISA. The IRS may refuse to issue an opinion letter when the plan fails to satisfy a Code provision that is parallel to a provision in ERISA Part 2 of Subtitle B of Title I (participation and vesting provisions).
Comments and information requested
The IRS requests comments on the draft revenue procedure and sample plan language, or any other part of the 403(b) prototype plan program in general. Written comments should be submitted by June 1, 2009 to CC:PA:LPD:PR (Announcement 2009-34), Room 5203, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Comments may also be submitted electronically to Notice.Comments@irscounsel.treas.gov.
The IRS requests that each entity that expects to file an opinion letter application for a 403(b) prototype plan, either as a prototype plan sponsor or as a mass submitter, notify the IRS of this in writing by June 1, 2009 at ep.prototype.projections@irs.gov. Potential mass submitters are asked to provide an estimate of how many opinion letter applications they will submit for prototype sponsors that use the mass submitters’ plans. All of this information, which is needed to anticipate the IRS’s future workload, should be submitted separately from any comments about the draft revenue procedure and sample plan language.
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