3912. What is the written plan requirement for 403(b) plans?Nuco Employeercline202008-12-03T19:56:00Z2015-07-06T19:28:00Z2015-07-06T19:28:00Z511916790Summit Business Media5615796614Site Map/Retirement Plans/403(b) Tax Sheltered Annuities/Plan Requirements 403(b)2005-01-24T00:00:00ZTaxFactsDefaultArticle130000474-00-tf1.xml477.00;#2208;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 1What requirements must a tax sheltered annuity contract meet?132300.000000000TaxFactsDefaultArticleSBMEDIA\moss-admin2010-01-15T01:24:39Z3912. What is the written plan requirement for 403(b) plans?According to final regulations, a contract does not satisfy the requirements for exclusion from gross income (Q 3910) unless it is maintained pursuant to a plan. For this purpose, a plan is a written defined contribution plan that in both form and operation satisfies the requirements set forth in the regulations..Treas. Reg. §1.403(b)-3(b)(3)(i). See Treas. Regs. §§1.403(b)-1 through 1.403(b)-11. Thus, a plan must contain all of the material terms and conditions for eligibility, benefits, applicable limitations, the contracts available under the plan, and the time and form under which benefit distributions would be made..Treas. Reg. §1.403(b)-3(b)(3)(i). See Treas. Regs. §§1.403(b)-1 through 1.403(b)-11.A plan may contain optional features that are consistent with, but not required, under IRC Section 403(b), including features with respect to hardship withdrawal distributions, loans, plan-to-plan or annuity contract-to-annuity contract transfers, and acceptance of rollovers to the plan. If a plan contains any optional provisions, the optional provisions must meet, in both form and operation, the relevant requirements..Treas. Reg. §1.403(b)-3(b)(3)(i).A plan may allocate responsibility for performing administrative functions, including functions to comply with the requirements of Section 403(b) and other tax requirements. Any allocation must identify responsibility for compliance with the requirements of the IRC that apply on the basis of the aggregated contracts issued to a participant under a plan, including loans under IRC Section 72(p) and conditions for obtaining a hardship withdrawal. A plan is permitted to assign responsibilities to parties other than the eligible employer, but not to participants..Preamble, TD 9340, 72 Fed. Reg. 41128, 41130 (7-26-2007).The final regulations do not require that there be a single plan document..See Preamble, TD 9340, 72 Fed. Reg. 41128, 41130 (7-26-2007). See also “Retirement Plan FAQs Regarding 403(b) Tax Sheltered Annuity Plans” at: (http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-403%28b%29-Tax-Sheltered-Annuity-Plans). To satisfy the requirement that a plan include all material provisions, the regulations permit the plan to incorporate by reference other documents including the insurance policy or custodial account, which as a result then become part of the plan. Consequently, a plan may include a wide variety of documents, but it is important for the employer that adopts the plan to ensure that there is no conflict with other documents that are incorporated by reference..Preamble, TD 9340, 72 Fed. Reg. 41128, 41130 (7-26-2007).Notice 2009-3 provided relief from immediate compliance with the written plan requirement in calendar year 2009. Effective January 1, 2009, sponsors of 403(b) plans generally were required to maintain a written plan that satisfies, in both form and operation, the requirements of the final regulations. In response to numerous requests for deferral of the effective date, the IRS announced in Notice 2009-3 that it will not treat a 403(b) plan as failing to satisfy the requirements of IRC Section 403(b) and the final regulations during the 2009 calendar year, provided that, (1) on or before December 31, 2009, the sponsor of the plan has adopted a written 403(b) plan that is intended to satisfy the requirements of IRC Section 403(b), including the final regulations, effective as of January 1, 2009, (2) during 2009, the sponsor operates the plan in accordance with a reasonable interpretation of IRC Section 403(b), taking into account the final regulations, and (3) before the end of 2009, the sponsor makes its best efforts to retroactively correct any operational failure during the 2009 calendar year to conform to the terms of the written 403(b) plan, with such corrections based on the general principles of correction set forth in the Employee Plans Compliance Resolution System “(EPCRS”)..Section 6 of Rev. Proc. 2008-50, 2008-35 IRB 464, as modified by Rev. Proc. 2013-12, 2013-1 CB 313. The IRS makes clear that the relief provided under Notice 2009-3 applies solely with respect to the 2009 calendar year and may not be relied on with respect to the operation of the plan or correction of operational defects in any prior or subsequent year..Notice 2009-3, 2009-2 IRB 250.The IRS amended its EPCRS program to permit employers which have not timely adopted written plan documents under Notice 2009-3 to correct that error by submitting the document for approval of late adoption. This is done by filing under the Voluntary Compliance Program under the EPCRS, and paying a filing fee which specifically applies to non-adopters. Remedial Amendment PeriodThe IRS has established an initial “Remedial Amendment Period” (“RAP”) for 403(b) plans related to changes imposed by the 2007 regulations,.Rev. Proc. 2013-22, 2013-18 I.R.B. 985 which has been extended for at least a year under Revenue Procedure 2014-28. Though the RAP was not specifically mentioned in the Revenue Procedure, it applies by operation of the manner in which the RAP is set under Revenue Procedure 2013-22.The first day of the RAP will be January 1, 2010 (though plan sponsors will be permitted to amend their plans retroactively to January 1, 2009), and the last day of the period is yet to be announced. The last day of the remedial amendment period will be determined by how quickly the IRS approves the first pre-approved 403(b) prototype plans submitted under Revenue Procedure 2013-22, as extended by Revenue Procedure 2014-28. All plan documents submitted for approval between June 28, 2013 and April 30, 2015 will be held and will eventually be approved at once as a single batch. At the same time that this “batched” approval is issued, the IRS will also announce the end of the initial remedial amendment period. This date will be “in excess of” one year from the date of its announcement.Any employer can also correct any plan document errors which occurred between January 1, 2009 and the date of the end of the RAP by adopting one of these “batched” prototype plans by that date.Plan document errors made after the end of the initial RAP can be corrected in accordance with the EPCRS by making a filing under the Voluntary Compliance Program. Model Plan LanguageIn 2007, the IRS issued Revenue Procedure 2007-71, which provides model plan language that may be used by public schools either to adopt a written plan to reflect the requirements of IRC Section 403(b) and Treasury regulations, or to amend a 403(b) plan to reflect the requirements of IRC Section 403(b) and Treasury regulations..Rev. Proc. 2007-71, 2007-51 IRB 1184, as modified by Notice 2009-3, 2009-2 IRB 250. The revenue procedure also provides rules for when plan amendments or a written plan are required to be adopted by public schools or other eligible employers to comply with final IRC Section 403(b) regulations. In addition, the revenue procedure addresses the use of the model plan language by employers that are not public schools. The model plan language in Revenue Procedure 2007-71 is intended for a basic plan under which contributions are limited to pre-tax elective deferrals..Employee Plans News Special Edition (November 30, 2007).Planning Point: The Model Plan Language has limited usefulness, as the IRS has issued extensive “sample” plan language in a “List of Required Modifications” it issued with Revenue Procedure 2013-22, which it is anticipating employers will use for those who are adopting individually designed plan documents. 403(b) Prototype Plan ProgramThe IRS has issued a pre-approved plan program for 403(b) plans similar to the current programs offered for IRC Section 401(a) tax-qualified plans under Revenue Procedure 2013-22. The IRS is only intending to issue determination letters to these mass submission plans, and will not issue determination letters on individually designed 403(b) plans.Interaction between Title I of ERISA and IRC Section 403(b) The Department of Labor is of the view that tax-exempt employers will be able to comply with the requirements in the new IRC Section 403(b) regulations and remain within the DOL’s safe harbor for TSA programs funded solely by salary deferrals. The DOL noted, however, that new IRC Section 403(b) regulations offer employers considerable flexibility in shaping the extent and nature of their involvement under a tax-sheltered annuity program. Thus, the question of whether any particular employer, in complying with the IRC Section 403(b) final regulations, has established a plan covered under Title I of ERISA must be analyzed on a case-by-case basis..Department of Labor Field Assistance Bulletin No. 2007-02 (7-24-2007).