How to Apply for a 403(b) Plan Opinion or Advisory Letter

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Jason:

Hi, I'm Jason Levine, a Senior Tax Law Specialist with the Employee Plans Rulings and Agreements Group.

Puneet:

And I'm Puneet Arora. I'm a tax law specialist with the Employee Plans Rulings and Agreements Group.

Jason:

The 403(b) Pre-approved Program sounds like a great solution for many entities. So how does the pre-approved plan sponsor, the entity that drafts the plan, apply to the IRS to get an opinion or advisory letter for a 403(b) plan?

We've tried to make the process as straightforward as possible to encourage more plan sponsors to use it.

First of all, each adoption agreement offered by a prototype sponsor and each volume submitter specimen plan must be submitted in a separate application. For example, if you have one basic prototype plan document but offer adopting employers the choice of three different adoption agreements, you would have to submit three applications for opinion letters.

You can apply for a letter by submitting a completed and signed "Application for Approval of section 403(b) Pre-approved Plan," as provided in the appendix to the revenue procedure governing this program.

And be sure to include the applicable user fee when submitting the application. So who's eligible to apply? Opinion letter applications for prototype plans may be filed by the prototype sponsor, a mass submitter submitting a mass submitter plan, or a mass submitter on behalf of a word-for-word identical adopter or minor modifier. Advisory letter applications for 403(b) volume submitter plans may be filed by a volume submitter practitioner, a mass submitter with respect to its mass submitter plan, or a mass submitter on behalf of a word-for-word identical adopter of the mass submitter's plan.

Puneet:

Mass submitters making an initial submission of a basic plan document or specimen plan should be sure to include applications for opinion or advisory letters filed on behalf of at least 30 word-for-word identical adopters of the basic plan document or specimen plan. Once this requirement for 30 adopters has been satisfied, the mass submitter may submit additional applications on behalf of other pre-approved plan sponsors that want to adopt a word-for-word identical or minor modifier plan regardless of the number of adopters. If the plan sponsor doesn't include everything needed in the application, the IRS will request the sponsor to provide it. The IRS may also request any additional information we deem necessary in connection with our review. However, if the application is so deficient that it cannot be reviewed in a reasonable amount of time, or the plan is not in substantial compliance with the approval requirements of the Program, the IRS will return it without further action.

Remember, if your application fails to disclose or misrepresents a material fact, this may adversely affect the employer reliance that would otherwise be obtained by a favorable opinion or advisory letter. To help sponsors out with the drafting of 403(b) plan documents, the IRS has provided its Listing of Required Modification, or LRM. The LRM consists of sample plan language to be used in drafting code section 403(b) pre-approved plans. Please note…the LRM is quite extensive and contains provisions on all of the aspects of a 403(b) plan that most plan sponsors or adopting employers would want or need in their plan, including both required and optional features.

The LRM includes model provisions for definitions of plan terms, contribution limits, eligibility, distributions, plan loans, investment vehicles, and many others.

The LRM can be access on the IRS website. Search for "LRM 403(b) prototypes."

Jason:

It's important to note that using LRM language is not required in 403(b) pre- approved plans, but it is effective as a guide in drafting such plans. While not required, the IRS encourages plan drafters to use the LRM language as much as possible. Because such language has been drafted by the IRS, adopting such language word-for-word will help with the review process and increase the chance of receiving a favorable letter. To expedite the review process, plan sponsors who submit applications for pre-approved plans that utilize LRM language are encouraged to highlight where in the document the LRM language is used.

Puneet:

For more details on the LRM and the 403(b) pre-approved plan program, visit us on the Web at irs.gov. Just search for "403(b) pre-approved plan."