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403(b) Pre-Approved Plan Program FAQs - Eligible Adopting Employers and Reliance on Letters

Who can adopt a 403(b) prototype or volume submitter specimen plan?

Any employer that is eligible to adopt a 403(b) plan, including:

  • Public schools
  • 501(c)(3) tax-exempt organizations
  • Churches
  • Certain self-employed ministers

What is an IRS opinion or advisory letter for a 403(b) pre-approved plan?

An opinion or advisory letter for a 403(b) pre-approved plan means that the IRS has determined that the pre-approved plan satisfies the requirements of IRC Section 403(b) (these requirements are specifically outlined in the opinion or advisory letter).

The IRS will not review and, therefore, an opinion or advisory letter will not cover the terms of any underlying investment agreements (for example, annuity contracts or custodial accounts), or any other ancillary document even if these documents are incorporated into the plan by reference.

An IRS opinion or advisory letter issued for 403(b) pre-approved plan doesn’t cover whether a plan is subject to, or satisfies, the requirements of ERISA.

The IRS will not issue opinion or advisory letters for:

  • Church defined benefit plans under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)
  • Plans grandfathered under Revenue Ruling 82-102
  • Plans that include blanks or fill-in provisions for the adopting employer to complete, unless the plan is designed in such a way to make it impossible for an eligible employer to complete the provisions in manner inconsistent with IRC Section 403(b).
  • Plans that incorporate by reference IRC Section 415 limitations or the average contribution percentage test of IRC Section 401(m)(2).
  • Any other plan the IRS determines in its discretion is not suitable for an opinion or advisory letter.

To what extent can an adopting employer rely on a 403(b) prototype plan’s opinion letter?

The extent to which an employer who adopts a 403(b) pre-approved plan can rely on the plan’s letter depends on both the:

  1. Terms of the plan’s opinion letter
  2. Type of employer.

Terms of the plan’s opinion letter - Adopting employers should carefully review the 403(b) prototype plan’s opinion letter for the scope of the letter.

Type of employer:

  • All employers – Adopting employers may not rely on the letter for whether the plan:
    • meets IRC Section 415 requirements if the adopting employer or any of its related employers maintain another 403(b) plan that covers any of the same participants, unless the other plan is also a 403(b) prototype plan.
    • satisfies any inherently factual issues (for example, whether the plan satisfied the Internal Revenue Code’s general nondiscrimination and coverage requirements for former employees).

  • Certain tax-exempt organizations – an adopting employer (that is not a governmental plan or a plan of a church or qualified church-controlled organization) may rely on the plan’s opinion letter that the form of the plan satisfies IRC Section 403(b) requirements in the following manner.
    • standardized prototype plan -  An adopting employer may rely on the plan’s letter for the plan meeting general nondiscrimination and coverage requirements, if:
      • the only contributions under the plan are employee salary deferrals, or
      • If the plan allows other contributions, all of the employers in the adopting employer’s controlled group are employers eligible to adopt a 403(b) plan. Otherwise, the adopting employer can’t rely on the opinion letter for whether the plan meets the nondiscrimination and coverage requirements for any contributions other than employee salary deferrals.

    • nonstandardized prototype plans - an adopting employer of a nonstandardized prototype plan may not rely on the letter for whether contributions other than employee salary deferrals satisfy the Internal Revenue Code’s general nondiscrimination and coverage requirements.

  • Governmental plans and plans of churches and qualified church-controlled organizations - adopting eligible employers may rely on a 403(b) prototype plan’s opinion letter regardless of whether the plan is a standardized or nonstandardized plan. However, the letter is conditioned on the adopting employer’s accurate representations that it’s eligible to adopt a governmental plan, or that it’s a church or qualified church-controlled organization.

To what extent can an adopting employer rely on a 403(b) volume submitter plan’s advisory letter?

An employer adopting a 403(b) volume submitter specimen plan may rely on an plan’s advisory letter that the plan document satisfies the requirements of IRC Section 403(b) except:

  1. If the employer modifies the terms of the approved specimen plan (other than by selecting among permitted options),
  2. On the following issues:
    • Whether the plan meets the general nondiscrimination and coverage requirements (unless the plan is a governmental plan or a plan of a church or qualified church-controlled organization).
    • Whether the plan qualifies as a governmental plan or whether the adopting eligible employer is a church or qualified church-controlled organization (the letter is conditioned on the adopting employer’s accurate representations that it’s eligible to adopt a governmental plan, or that it’s a church or qualified church-controlled organization).
    • Issues of an inherently factual nature (for example, whether the plan satisfied the Internal Revenue Code’s general nondiscrimination and coverage requirements for former employees).
    • Whether the plan meets IRC Section 415 requirements if the adopting employer or any of its related employers maintain another 403(b) plan that covers any of the same participants as those in the 403(b) volume submitter plan.

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Page Last Reviewed or Updated: 20-Jun-2013