Benefits & ERISA Law

IRS Issues 403(b) LRMS and Details of Pre-Approved 403(b) Prototype Plans

By Suzanne Wynn

Today, the IRS took two major steps forward toward pre-approving 403(b) plan documents when it issued the Listing of Required Modifications (LRM) for 403(b) plans and also issued Announcement 2009-34 which requests comments on the draft Revenue Procedure for 403(b) Prototype Plans.

The 403(b) LRMs are 67 pages long, and provide draft sample language for 403(b) prototype plan documents. For non-drafters of plan documents, the LRMs are an interesting read but probably will not provoke intense debate and discussion. For those of us who write plan documents, the LRMs are an invaluable tool because they provide insight into what the IRS is thinking on specific plan document language. For example, the 403(b) LRMs provides this draft definition of “State”, which is immensely helpful to settle the argument over whether the IRS wants to see references to the District of Columbia and Indian tribal governments included in the definition of “State”:

?State? means a State, a political subdivision of a State, or any agency or instrumentality of a State. ?State? includes the District of Columbia (pursuant to section 7701(a)(10) of the Internal Revenue Code). An Indian tribal government is treated as a State pursuant to section 7871(a)(6)(B) of the Internal Revenue Code for purposes of section 403(b)(1)(A)(ii) of the Internal Revenue Code.

The IRS also issued Announcement 2009-34, containing a draft Revenue Procedure which provides the first details of the pre-approved prototype program for 403(b) plans. The IRS is requesting comments by June 1, 2009.

Announcement 2009-34 does not contain the date on which 403(b) specimen plans can be submitted to the IRS for approval. Instead, it states that this date will be provided in the future but will not be earlier than March 15, 2010. It also states that this revenue procedure will allow an eligible employer to retroactively correct defects in the form of its written section 403(b) plan by timely adopting an approved section 403(b) prototype plan that was submitted to the Service for an opinion letter by the announced date.

Noticeably absent from Announcement 2009-34 is any provisions for pre-approving volume submitter 403(b) plans. Announcement 2009-34 specifically addresses prototype plans, and does not mention volume submitters.

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Full post as published by Pension Protection Act Blog on April 14, 2009 (boomark / email).