Benefits and Compensation

IRS Gives 403(b) Plans More Time to Get Pre-approved, Expands Eligibility

After hearing concerns from the retirement plan industry, the IRS issued modifications on March 25 to its pre-approved program for 403(b) plans, in Revenue Procedure 2014-28. These welcome changes will provide another year — until April 30, 2015 — to apply for the program and will increase the number of entities that can take advantage of it.

Background

In March 2013, IRS issued Revenue Procedure 2013-22, which contained a long-awaited pre-approved mass submitter plan program for 403(b) plans. The program, modeled after one for for pre-approved 401(a) qualified plans, is designed to relieve employers of the expense and difficulties of adopting their own plan document, submitting it to the IRS for approval and maintaining the plan terms in accordance with changing rules and regulations. Under the program, a third party writes a plan document so it can be adopted by its customers without changes.

Two categories of pre-approved plans — prototype plans and volume submitter plans — are available. A “mass submitter” can submit applications on behalf of at least 30 prototype sponsors, or 30 volume submitters, respectively, that are sponsoring an identical plan document (word-for-word identical adopters). A minor modifier is a plan sponsor with a plan document that is “word-for-word identical” to a mass submitter plan, except for minor changes that do not require in-depth technical review for opinion letter purposes.

A 403(b) plan sponsor that has received an IRS opinion or advisory letter under this program will obtain assurance that its plan meets 403(b) requirements.

The IRS began accepting plan sponsor applications for the program on June 28, 2013. It had a deadline of April 30, 2014 to receive the first batch of applications, and planned to issue letters and opinions on this batch at the same time. However, retirement plan industry groups expressed concerns that the deadline was too short, and the number of entities that could take advantage of the program were too small.

The Modifications

Revenue Procedure 2014-28 modifies the earlier revenue procedure in several ways, most key being: (1)  the one-year deadline extension for applications, to April 30, 2015; and (2) dropping the “mass submitter” threshold from 30 prototype sponsors or volume submitters down to 15 sponsors or submitters. The modifications take effect April 14, 2014.

More details on this revenue procedure and 403(b) plan administration can be found at hr.complianceexpert.com.

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