ASPPA Asks IRS to Clarify LRMs for 403(b) Plans

In conjunction with the National Tax Sheltered Accounts Association (NTSAA), Craig P. Hoffman, ASPPA’s general counsel and director of regulatory affairs, sent the comment letter to the IRS. The letter specifically asked for clarification on the draft language for LRM 24 “Severance From Employment” and LRM 65 “Vesting.”

With the first item, LRM 24, Hoffman recommended that it be consistent with LRM 22 and with existing guidance under IRS Notice 89-23. He further recommended that LRM 24 be amended to clarify that, for purposes of determining whether a “Severance From Employment” has occurred, “Related Employer” status be determined under the definition previously issued in LRM 22. Also recommended was that the new example given in LRM 24 should be excluded entirely, or at least clarified to specifically note that all public schools within the same state are not necessarily “Related Employers” under the special rules of IRS Notice 89-23. This change, he said, would eliminate confusion as to the inconsistency between LRM 22 and LRM 24.

For the second item, LRM 65, Hoffman recommended that the IRS make it clear that nonvested amounts require appropriate separate recordkeeping entries (i.e., “separate accounting”) and not a physical segregation of assets or investment in a separate insurance contract or custodial account.

“We thank the IRS for its continued effort to make the 403(b) plan design process easier for sponsors, so that more American workers will have reliable workplace retirement plans,” said Hoffman. “Implementing our recommendations would aid the IRS in meeting that important goal.”

The full text of the comment letter can be found here.