For many years, the IRS has had a program for qualified plans (e.g., 401(k) plans) under which plan document drafters submit their plans to the IRS for approval as to their form (i.e., whether their language properly incorporates applicable law changes). After the IRS approves a drafter’s plan document, the drafter’s plan sponsor clients can adopt that document. In 2013, the IRS established a similar program for 403(b) plans. Under Cycle 1, which was the first period for which the program applied, plan sponsors of IRS pre-approved plans had to adopt those new plan documents by June 30, 2020. Also note that the IRS requires the restatement of every 403(b) pre-approved plan every six years.
- Eliminates the distinction between prototype and volume submitter plans. The prototype and volume submitter programs are combined and replaced by a single Opinion Letter program that provides for two types of plans: standardized plans and nonstandardized plans (which offer more flexibility than standardized plans). Also, a pre-approved 403(b) plan can have one of two formats: an adoption agreement with a Basic Plan Document, or a single plan document.
- Provides that the IRS will issue a Cumulative List of Changes identifying the 403(b) requirements that the IRS will take into account when reviewing 403(b) pre-approved plans that are submitted for Cycle 2. The on-cycle submission period for plan document drafters’ Cycle 2 applications will begin on May 2, 2022 and will end on May 1, 2023.
- Permits the submission of an application for a determination letter via Form 5307, by (1) an adopting employer of a nonstandardized plan that makes amendments to the plan that are not extensive, or (2) an adopting employer of any 403(b) pre-approved plan that adds language to satisfy the requirements of Internal Revenue Code section 415 because of the required aggregation of plans.
- Extends the plan amendment deadline for making interim amendments with respect to a change in 403(b) requirements (for most plans) until the end of the second calendar year after the calendar year in which the change is effective with respect to the plan. An interim amendment is one that is required by law, as opposed to a permissive amendment. An example of a permissive amendment is a plan sponsor deciding to amend the plan to change its eligibility provisions, when that decision is not required by applicable law, regulations, or other guidance.