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Of special interest to public colleges and universities and public school districts - §403(b) prototype plans and sample plan language

Of special interest to public colleges and universities and public school districts - §403(b) prototype plans and sample plan language
Internal Revenue Service advisory - Internal Revenue Code §403(b)

The IRS is seeking comments on the proposed §403(b) plan prototype program and the ?sample plan language for drafting §403(b) prototype plans.?

The 403(b) prototype plan program will allow eligible employers to adopt a pre-approved prototype plan and comply with §403(b) and the §403(b) final regulations, including the written plan requirement.

These proposals would apply to such eligible employers as a public college, a public university or a public school or an employer described in §501(c)(3) that is exempt from tax under §501(a). In addition, the plan provides for ?a mass submitter? ? i.e., an individual or entity that submits opinion letter applications on behalf of at least 30 prototype sponsors that have adopted, on a word-for-word identical basis, the same basic plan document.

A §403(b) prototype plan is ?standardized? if:

1. Elective deferrals are the only contributions under the plan; or

2. The plan provisions, other than for elective deferrals, benefit all eligible employers? non-excludable employees in the employer?s controlled group ?under a design-based nondiscrimination safe harbor allocation formula.?

When adopting eligible employer may not rely on the opinion letter with respect to whether contributions under the plan (other than elective deferrals) satisfy the requirements of §§401(a)(4) and 410(b) if either:

1. The plan is not standardized, or

2. The plan permits contributions other than elective deferrals and the adopting eligible employer?s controlled group includes any employer that is not an eligible employer.

The IRS will not review any annuity contracts or custodial accounts under the plan.

The Internal Revenue Service notes that the prototype plan?s terms (basic plan document and adoption agreement) must satisfy the Internal Revenue Code and Regulations? requirements and must override any contract or account terms that are inconsistent with the plan. However, employers may provide multiple investment arrangements (for example, annuity contracts and custodial accounts) in a plan or have different features in those arrangements.

A retroactive remedial amendment will be permitted so that an eligible employer can retroactively correct defects in its written §403(b) plan?s form by timely adopting an approved §403(b) prototype plan or by otherwise timely amending its plan and submitting a request for a determination letter once a determination letter program becomes available for §403(b) plans. The eligible employer must amend its plan retroactive to the first day of the plan?s remedial amendment period.

Additional information is posted on the Internet at:
http://www.irs.gov/pub/irs-tege/se0409.pdf

Full post as published by New York Public Personnel Law on April 16, 2009 (boomark / email).