With the announcement of the adoption period for pre-approved 403(b) plan documents, the long-awaited reliance for IRS plan approval is here. The IRS issued Revenue Procedure 2017-18, which sets March 31, 2020 as the date by which plan sponsors must restate their plans to a pre-approved document.

The first regulations in forty-three years were issued in 2007, providing nonprofit plan sponsors a December 31, 2009 deadline to adopt a written plan document incorporating the new regulations. While all 403(b) plans were required to adopt a plan by that date, there was no IRS approval program for the plan documents. The 403(b) documents were considered valid on a “good faith compliance” basis and could consist of more than one document, including language contained in the group annuity contract.

The IRS announced a pre-approved document program for 403(b) plans in 2013 similar to the 401(k) plan document program. A significant difference is there is no avenue for individually designed plans to gain IRS approval; only pre-approved plans have reliance that their provisions are compliant with government regulations. Document providers filed their documents for approval by the IRS in 2015 and the IRS approval letters are currently being issued.

The new Revenue Procedure establishes a Remedial Amendment Period (RAP) for retroactive changes to the plan document dating back to January 1, 2010. A restated plan document can correct for any document errors over a ten-year period bringing the plan into compliance. To gain reliance on the plan approval letter, the document must contain all the plan provisions for each change back to the beginning of the RAP.

All 40(b) plans will be required to restate their documents onto a pre-approved plan by March of 2020. Once the RAP is concluded, 403(b) plans and 401(k) plans will be similar with respect to compliance requirements and correction methods. With the similar treatment, 403(b) plans will also be subject to the same scrutiny by plan regulators upon examination.

MCM CPAs & Advisors can assist with your 403(b) plan document needs. If you would like more information or have questions, please contact Kathy Doughten at kathy.doughten@mcmcpa.com or a member of the Employee Benefits Team at (502)749-1900.