IRS Allows for Effective Date Addendums for 403(b) Plan Documents

Generally, the overall effective date for 403(b) pre-approved plans are plan years beginning on or after January 1, 2010, but this raises issues for certain plan sponsors.

Without much fanfare, the Internal Revenue Service (IRS) opened its pre-approved plan program for 403(b) plans by issuing a list of providers of pre-approved plans.

Employers may adopt pre-approved 403(b) retirement plans through March 31, 2020. Though 403(b) plan sponsors had to adopt a written plan by December 31, 2009, under regulations passed in 2007, the IRS announced a remedial amendment period during which they would be able to restate their plans to adopt one of the prototypes. Employers may adopt these plans as restatements to correct any form defects from January 1, 2010, to the end of the remedial amendment period. 

The IRS notes that this raises an issue for adopting employers that want to use a pre-approved plan with certain provisions that were not in effect for the plan for the entire restatement period (effective date of the pre-approved plan to the adoption date), or options that have changed during the restatement period.

To address this issue, the IRS says an adopting employer’s reliance on a pre-approved 403(b) plan’s opinion or advisory letter is not affected simply because the employer uses an effective date addendum—a list of effective dates for certain plan provisions different from the plan’s general effective date—if the addendum lists dates that accurately reflect the plan operation, and complies with the scope of the plan’s letter.

More information is here.