IRS Revises Remedial Amendment Procedures for Pre-approved 403(b) Plans

The IRS has modified its process for issuing opinion letters for Cycle 2 amendments and changed the Section 403(b) pre-approved plan process to conform more closely to the procedures in the Section 401(a) pre-approved plan process.

Under Rev. Proc. 2021-37, issued Sept. 1, changes to the 403(b) pre-approved plan process include: 

• simplifying the program by eliminating the distinction between prototype and volume submitter plans; 
• providing that the IRS will issue a “Cumulative List of Changes in the Section 403(b) Requirements” identifying the requirements that the IRS will take into account in reviewing 403(b) pre-approved plans submitted for Cycle 2; 
• providing details regarding the system of cyclical remedial amendment periods that follows the initial remedial amendment period; and
• making the provisions regarding reliance on an opinion letter more similar to the provisions applicable under the Section 401(a) pre-approved plan program.

The latter change includes provisions that permit the submission during the Employer Adoption Window of an application for a determination letter using Form 5307, Application for Determination for Adopters of Modified Volume Submitter Plans, by:

• an adopting employer of a nonstandardized plan that makes amendments to the plan that are not extensive; or 
• an adopting employer of any 403(b) pre-approved plan (whether a standardized plan or a nonstandardized plan) that adds language to satisfy the requirements of Code Section 415 due to the required aggregation of plans.

The IRS notes that the on-cycle submission period for Cycle 2 applications will begin on May 2, 2022, and end on May 1, 2023. Additionally, for most plans, the revenue procedure extends the plan amendment deadline for making interim amendments with respect to a change in Section 403(b) requirements until the end of the second calendar year following the calendar year in which the change is effective with respect to the plan.

Also on Sept. 1, the IRS issued Rev. Proc. 2021-38, making conforming changes in the Section 401(a) pre-approved plan process.