One of the more difficult rules that the IRS has imposed on the 403(b) market in recent years is the complete ban on issuing determination letters on individually designed 403(b) plan documents, under any circumstance. The IRS has taken the position that all 403(b) plans must be on a pre-approved document in order to gain the “reliance” value of a determination letter. Unlike the 401(a) market, where there remains a process for IRS approval of individual designed documents, 403(b) plans have been granted no such grace. This can be a challenge for many “legacy” 403(b) plans which have been in existence for many generations (keep in mind that the first 403(b) type of plan showed up in 1919).
Now the IRS has issued Rev Proc 2017-41, where it has fundamentally changed the structure of the pre-approved plan program fro 401(a) plans (2017-41 specifically does not apply to 403(b) plans). That Rev Proc eliminated the term “determination letter” for pre-approved plans, as well any distinction between “volume submitter” and “prototype “plan documents.
Buried in that Rev Proc is something we have been looking for in the 403(b) space, which actually would help alleviate some of the concerns document drafters have with these long-standing plans. Here’s what it says, in Section 8.03:
“Notwithstanding the preceding sentence, the following types of amendments will not cause a plan to fail to be identical to a Pre-approved Plan and, thus, will not result in the employer losing reliance on the Opinion Letter:
(7) Amendments to the administrative provisions in the plan (such as provisions relating to investments, plan claims procedures, and employer contact information), provided the amended provisions are not in conflict with any other provision of the plan and do not cause the plan to fail to qualify under § 401.”
There are actually a whole host of terms under a 403(b) plan to which this could be applied, especially given the fact that many plans have used a wide multitude of vendors over a long period of time. It may not address all of the issues we have, but given the fact that there really are only a relatively small handful of 403(b) plan terms which can actually affect the 403(b) status of a plan, this type of approach may prove some of the answers for which we are looking.
Does this suggest that the IRS will be willing to take a similar, flexible approach to 403(b) plan documents?