IRS Offers Model 403(b) Plan Language for Public Schools

The 2007 final 403(b) regulations included the requirement that § 403(b) contracts must be maintained pursuant to a written plan (See Final 403(b) Regs Give Sponsors a Break on their Effective Date ).

The IRS pointed out the preamble to the regulations indicated that, while § 403(b) contracts that are subject to the Employee Retirement Income Security Act (ERISA) are already maintained pursuant to written plans, there may be a potential cost associated with satisfying the written plan requirement for those employers that do not have existing plan documents, such as public schools. The new revenue procedure is intended to address this concern by providing model plan language that may be used for this purpose by public schools.

Any public school employer may comply with the written plan requirements of the 2007 regulations by adopting the model provision(s) contained in the Appendix to the revenue procedure. The model language has been prepared to take into account the general requirement that a § 403(b) plan include all the material terms and conditions for benefits under the plan.

If a public school employer amends its plan language to include any portion of the model language, the form of the written plan will be treated as meeting the requirements of § 403(b), to the extent covered by the model plan language that is adopted, according to the IRS.

To the extent a public school employer’s § 403(b) plan does not include the model plan language or an amendment that is substantially similar in all respects, a public school that requests a private letter ruling from the IRS with respect to the qualification of its § 403(b) written plan must clearly highlight and describe in the written request how its plan provisions differ from the model language.

An eligible employer that is not a public school may use the provisions of the Appendix as sample language to comply with one or more of the requirements imposed by the 2007 regulations issued under § 403(b).

A § 403(b) plan will be treated as having been amended in a timely fashion to reflect a requirement of the 2007 regulations if an amendment that satisfies that requirement is adopted no later than the first day of the first taxable year beginning after December 31, 2008, the amendment is effective as of the applicable effective date of the requirement under the 2007 regulations, and the written plan is operated as if that amendment is in effect.

The revenue procedure also provides guidance relating to the application of § 403(b) to certain contracts issued before 2009.

Revenue Procedure 2007-71 is here .