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The IRS’s Employee Plans (EP) unit will issue more guidance on how to satisfy the requirements for 403(b) plans, EP Tax Law Specialist Robert Architect stated on April 16, 2009 in an IRS phone forum.
The IRS will update the EPCRS program to address 403(b) plans, Architect said. The revisions will be issued in the “near term,” he indicated. Initially, the revised procedures will allow plans to correct operational failures. Architect noted that, for 2009, 403(b) plans must operate in good-faith compliance with final regulations issued in 2007 (see CCH Pension Plan Guide ¶24,508U ). Ultimately, plans will be able to correct both operational and form violations, he said. Plan document requirements were scheduled to take effect on January 1, 2009, but were postponed until December 31, 2009 (Notice 2009-3, CCH Pension Plan Guide ¶17,141S).
Architect’s comments came just two days after the IRS released a draft revenue procedure and sample plan language for 403(b) prototype plans (Announcement 2009-34, CCH Pension Plan Guide ¶17,097T-35 ). A prototype plan is used by vendors who provide plans to at least 30 employers. Once the IRS issues a favorable opinion letter on the form of the prototype plan, any employer adopting the plan can rely on the IRS opinion. Architect strongly encouraged interested parties to provide comments on the draft revenue procedure and sample plan language by the June 1, 2009, deadline.
The IRS also is committed to creating a determination letter program for individually-designed plans, Architect said. This will come later, he indicated, after the prototype plan procedures are completed.
403(b) plan audits
Audits of 403(b) plans will continue in 2009 but will focus on operational failures, Architect said. Universal availability of benefits is the main issue, he stated. Architect reported that the EP Compliance Unit sent out 5,500 letters to public schools to check compliance with universal availability. But no audits are being conducted under this program and no more letters will be sent out.
Under the transition rules, the absence of a written plan, or a faulty written plan, is permissible in 2009, Architect said. The IRS official urged plan sponsors to use 2009 to amend existing plans so that they comply with the final regulations. IRS auditors will not look for plan document failures in 2009. However, after 2009, the failure to maintain a proper plan document can result in the disqualification of the plan.
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