For several years now, the Internal Revenue Service has been working to institute a new 403(b) “prototype” plan document program. The industry received notification from the IRS in January that they were close to finalizing the new program. In early April, the IRS sent approval letters and new plan documents to sponsoring organizations.
We have put together a quick FAQ to address key questions 403(b) plan sponsors may have regarding the adoption of these new 403(b) prototype plan documents.
What is a prototype plan document?
A prototype plan document is essentially a plan document that is pre-approved by the Internal Review Service. When an employer adopts a prototype plan and follows IRS sanctioned plan restatement procedures, the employer has “reliance” that the provisions in the plan are IRS compliant – ensuring that plan assets are protected from taxation.
Is there a deadline for adopting the 403(b)-prototype document?
Yes. The IRS set March 31, 2020 as the deadline to adopt the new prototype plan document and implement the plan restatement process.
Are there other provisions or documents associated with the new prototype documents?
Yes. The new prototype plans include an Administrative Appendix that identifies the responsibilities of the employer, its third-party administrator (if applicable), and the plan’s investment providers. The Appendix also includes an annual audit requirement of the plan’s investment providers. The audit includes a review of agreements, forms, required notices, etc.
IRS 2009 Model Plan Language
Will a public education employer who adopted a plan document that included IRS model plan language from 2009 have the same IRS reliance of a prototype plan document?
No. After March 30, 2020, only prototype 403(b) plan documents will carry reliance from the IRS that the plan document is compliant.
What other things do I need to consider?
Using the proper plan document is critical. There are nuanced plan document provisions needed for the different employers who are eligible to sponsor a 403(b) plan. The document used for a public school is different than a plan document for a 501(c)(3) institution that is subject to ERISA. Charter schools, faith-based organizations, and governmental health care and universities face additional challenges to ensure they are adopting a document that is proper for their organization.
Where can I get help?
To speak with a member of our team, call us at 877-484-4400 Option 2 or email us at firstname.lastname@example.org
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