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The IRS has issued model plan language for use by public school employers in adopting or amending a 403(b) plan, which reflects the final 403(b) regulations issued on July 26, 2007 (CCH Pension Plan Guide ¶24,508U ). The model language is intended for a basic public school plan under which contributions are limited to pre-tax elective deferrals, without any designated Roth, employer matching, or other employer nonelective contributions.
The 2007 regulations provide that a 403(b) plan may contain certain optional features ordinarily not part of such plans, such as in-service distributions from rollover accounts, distributions for financial hardships, loans, contract exchanges, and plan-to-plan transfers. If a public school employer adopts one or more of these optional model plan language provisions for its 403(b) plan, the form of the plan will be treated as meeting the requirements under Code Sec. 403(b) with respect to those provisions.
The IRS states that if a public school employer adopts the entire model language as its written plan, the plan will have the same status as if a private letter ruling had been issued stating that the written form of the plan satisfied Code Sec. 403(b).
In the case of a contract issued after December 31, 2004 and before January 1, 2009 by an issuer that does not receive contributions under the plan in a year after the contract was issued (e.g., due to the issuer having been discontinued as an issuer under the plan due to the contract having been issued in a post-September 24, 2007 exchange permitted under Rev. Rul. 90-24 (CCH Pension Plan Guide ¶19,732 )), the contract will not fail to satisfy Code Sec. 403(b) for the year if the employer makes a reasonable, good faith effort to include the contract as part of the employer’s plan that satisfies the 2007 regulations, according to the IRS.
In the case of an issuer that holds contracts under a 403(b) plan, but which ceases to receive contributions before January 1, 2009 (e.g., due to the issuer having been discontinued as an issuer under the plan, the employer having ceased to exist, or the issuer having become an issuer under the plan due to the contract having been issued in a Rev. Rul. 90-24 exchange), those contracts continue to be subject to the requirements of 403(b) and the 2007 regulations to the extent applicable. However, a 403(b) plan will not be treated as failing to satisfy the requirements of the 2007 regulations if the plan does not include terms relating to those contracts.
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