Groups Ask IRS not to Abandon 403(b) Prototype Program

January 23, 2012 ( – Industry groups sent a comment letter to the Internal Revenue Service to support the inclusion of 403(b) plans in the prototype program for pre-approved plan documents.

The National Tax Sheltered Accounts Association (NTSAA) and the American Society of Pension Professionals & Actuaries (ASPPA) say informal comments have been made by IRS officials that budget concerns have resulted in a reexamination of whether to include 403(b) plan documents in the pre-approved plan program. The groups argue a prototype program for 403(b) plans is essential for the proper administration of the tax laws.   

“After the issuance of so much guidance related to the written plan requirements, we believe it would be a mistake to abandon an integral component of 403(b) compliance. We therefore urge the Service to proceed with implementation,” the letter says.  

NTSAA and ASPPA note that many plan sponsors and their advisers have followed the new 403(b) plan document mandate closely over the last few years and anticipated the 403(b) prototype plans would be available by now. If 403(b) pre-approved plans are ultimately not included in the prototype program, it will put plan sponsors, such as charities and public schools, in a potentially untenable position. They are required to have a compliant written plan under the final regulation. IRS enforcement agents will be actively auditing whether their plan documentation is correct, yet the Service has indicated it may not be willing to provide for a cost-effective, pre-approved 403(b) plan document program, as it does for the private sector.   

“In effect, the failure to add 403(b) plans to the prototype program would put 403(b) plan sponsors — for which the written plan is commonly a new requirement — at a significant disadvantage compared to 401(k) plan sponsors,” according to the letter.  

The groups contend this cost and uncertainty will cause a percentage of current plan sponsors to terminate their programs and discourage other nonprofit employers from adopting new plans.  

The comment letter is at