Architect of IRS 403(b) Regs Says Limited Formal Guidance Coming

Those waiting for additional guidance from the IRS dealing with 403(b) model plan language or information sharing agreements shouldn’t hold their breath.

So explained Robert Architect, of Tax Exempt and Government Entities (TEGE) at the Internal Revenue Service (IRS), while opening the PLANSPONSOR 403(b) Summit today in Amelia Island.

Architect discussed what has been going on since the final 403(b) regulations were issued in 2007 (See Final 403(b) Regulations Released). The IRS has put out one piece of post-regulatory guidance: Revenue Procedure 2007-71 in December 2007 (See IRS Offers Model 403(b) Plan Language for Public Schools).

Despite the release of only one piece of post-regulatory guidance, Architect noted that there is much more going on in Washington around these rules. Currently, he said, his IRS division is working on a preapproved program for 403(b) plans, which will be similar to the 401(k) program. However, Architect advised those in the audience that they should not expect the program to be open on January 1, 2009 (the general effective date of the regulations), and plan sponsors will still need to have their written plan requirement on that date. They cannot wait for the preapproved program to be in place to comply (See SPARK Asks IRS for 403(b) Prototype Plan Program).

The IRS has received a number of comments about model plan language, Architect said, many of which ask for additional language, addressing things such as Roth contributions or matching contributions. Unfortunately, Architect said the IRS will not be issuing more guidance during this regulatory year in that area.

Revenue Procedure 2007-71 contained model plan language for public school use. Architect noted that if a public school plan uses the model language, the IRS guarantees that the plan complies with the form requirements. Plans should know that they do not have to use the whole model language if it is not all relevant to that particular plan; “use what is applicable to your organization,’ he said. Architect also noted that plans can add language as well, if necessary, and the model language protection “does not blow up.’

The model language can also be used by other organizations. If a non-public school uses it, he noted, it becomes sample language. Although legally it does not meet the reliance standard it has for the public school use, “get real,’ Architect told the audience, “it is language that we wrote’ and examiners will not be penalizing organizations that use this language if not a public school.

Another area of concern is that of information sharing agreements. Architect said that the IRS will not publish a model information sharing agreement. However, he noted, the IRS did say what should be in such an agreement in Section 6.4(d) of the model language, so plan sponsors can look to that for guidance.

Architect also noted that, in order to better serve 403(b) plans, TEGE is working to expand the 403(b) provisions of the Employee Plans Compliance Resolution System (EPCRS). There has been limited 403(b) business in that area, something Architect expects to change, he said. Therefore, there will soon be new provisions that include types of common defects applicable to 403(b) plans.