Late last year, in Ann. 2009-89, 2009-52 I.R.B. 1009, the IRS announced that it would publish revenue procedures opening a prototype program for plans subject to Code Section 403(b) and a determination letter program for individually-designed 403(b) plans and providing further guidance on correcting plan defects. According to the IRS, the revenue procedure on prototype plans reportedly is almost complete, and will be issued in the near future. The revenue procedure on individually designed plans is expected by summer.
Meanwhile, the DOL has issued Field Assistance Bulletin (FAB) 2010-01 (Feb. 17, 2010), which addresses, in Q&A format, a number of issues that have been raised with the DOL concerning the scope of the transition relief in FAB 2009-02 (July 20, 2009) from the annual reporting and related auditing requirements for plans with pre-2009 403(b) contracts and custodial accounts, and the safe harbor exception in 29 C.F.R. § 2510.3-2(f) from ERISA for Section 403(b) plans with limited employer involvement. Among other things, FAB 2010-01 clarifies that the transition relief will continue to apply beyond the 2009 reporting year, that it will not be lost merely because the employer makes a final contribution in 2009 that relates to 2008, but that it will be lost if the employer, through salary reduction, forwards employee loan repayments to the Section 403(b) provider. Regarding the safe harbor exception from ERISA, FAB 2010-01 states, among other things, that the safe harbor is not available if the arrangement makes optional features, such as participant loans, available as long as the 403(b) provider, and not the employer, is responsible for any discretionary determinations, and that this is true even if the employer hires a third-party administrator to make the discretionary decisions.