On March 28, 2013, the IRS published new procedures for issuing opinion and advisory letters for Code Section 403(b) pre-approved plans—i.e., 403(b) plans stated on a prototype or volume submitter document. Section 403(b) Plans can be established by tax exempt 501(c)(3) organizations, public schools, and certain religious organizations.
Under the new program, the IRS will accept applications from document providers for opinion and advisory letters regarding whether their form of 403(b) prototype and volume submitter plans satisfy the requirements of the Code. The program opens on June 28, 2013. Individual employers who satisfied the requirement to have a 403(b) written plan document by December 31, 2009, but who now find there are defects in the documentation they used can correct those failures if they adopt a plan document sanctioned by the IRS under this program.
The IRS has not, as yet, issued similar procedures for securing a favorable determination letter on an individually designed 403(b) Plan, although it has from time to time issued private letter rulings regarding the excludability of contributions to 403(b) plans. Thus, if you sponsor a 403(b) Plan this new program, implicitly encourages you to re-state your Plan on a prototype or volume submitter document that has secured an opinion or advisory letter, as that is the best way to ensure that your Plan complies with the written plan tax qualification requirements.
If you sponsor a 403(b) Plan, look out for communication from your current document provider informing you of their participation in the new program. If your document provider does not participate, it might be time to look for a new provider who can offer you an IRS-approved prototype or volume submitter plan document.
Consider making design changes to your Plan at the same time you restate it. It’s also a good time to review the operation of your plan for compliance with the various requirements of the Code and regulations, particularly in light of the IRS correction programs now available to 403(b) plans. These programs allow for correction of operational errors with IRS approval and limited financial consequences. And if you failed to update your 403(b) plan by the December 2009 deadline, it's time correct that failure.