403(b) Plans: IRS Announces New Document Window


A new era has finally arrived for 403(b) documents with the announcement of the adoption period for pre-approved plan documents. The IRS has issued Revenue Procedure 2017-18, which sets March 31, 2020 as the date by which plan sponsors must restate their plans to a pre-approved document.

After the first regulations in forty-three years were issued in 2007, nonprofit plan sponsors were provided a December 31, 2009 deadline to adopt a written plan document incorporating the new regulations. While all 403(b) plans were required to adopt a plan by that date, there was no IRS approval program for the plan documents. The documents were considered valid on a “good faith compliance” basis and could consist of more than one document, including language that might be contained in the group annuity contract.

In 2013, the IRS announced a pre-approved document program for 403(b) plans similar to that available to 401(k) plan sponsors. A significant difference is that there is no avenue for an individually designed plan to gain IRS approval; only pre-approved plans will have reliance that their provisions are compliant in the eyes of the government. Document providers filed their documents for approval by the IRS in 2015 and the IRS approval letters are being issued currently.

The new Revenue Procedure establishes a Remedial Amendment Period (RAP) for retroactive changes to the plan document back to January 1, 2010. A restated plan document can correct for any document errors over a ten-year period to bring the plan into compliance. To gain reliance on the plan approval letter, the document must contain all of the plan provisions for each change back to the beginning of the RAP. All 403(b) plans will be required to restate their documents onto a pre-approved plan (such as the plan sponsored by Windes) by March of 2020. Once the RAP is concluded, 403(b) plans and 401(k) plans will be on a level playing field with respect to compliance requirements and correction methods. With the similar treatment, 403(b) plans will be subject to the same scrutiny by plan regulators upon examination. Please contact us with any questions about your plan document.

For more information or questions about this article, please contact Richard Green at rgreen@windes.com or toll free at 844.4WINDES (844.494.6337).