IRS Announces Long-Awaited 403(b) Plan Rule

Sponsors of 403(b) plans may well remember that in 2009 the IRS required, for the first time, that 403(b) plans be operated in accordance with the terms of a written plan document. In 2013, the IRS announced that it would allow 403(b) plan documents to be corrected retroactively to fix any defects in the form of the plan. A defect in the form of a plan is a provision, or the lack of a provision, that causes the plan to fail to meet the requirements of 403(b). The period during which a sponsor could correct the plan document is called the remedial amendment period (“RAP”). The IRS stated that RAP for 403(b) plans would begin on January 1, 2010 (or, if later, the plan’s effective date) but the IRS had not until now set an end date for the RAP.


In Rev. Proc. 2017-18, the IRS finally announced that the end date for the RAP will be March 31, 2020. This means that 403(b) plan sponsors have about three years to conform the terms of their plans to the requirements of the statute and regulations, if necessary. If the plan is corrected by March 31, 2020, the IRS will deem the plan’s form to be in compliance with 403(b) since January 1, 2010 (or, if later, the plan’s effective date).


There are two ways to correct a plan and be treated as being in compliance from 2010:

  • The plan sponsor can adopt a “pre-approved” 403(b) plan document. Pre-approved 403(b) documents are first being introduced later this year, and as of this writing are not yet available. A pre-approved plan document is one that has been submitted to the IRS by a plan document provider and has received a letter of approval from the IRS. If a plan sponsor elects to adopt a pre-approved plan document by March 31, 2020, it will be treated as retroactively complying with the 403(b) requirements for all periods the plan was in place back to January 1, 2010.

  • The plan sponsor can amend its current plan to comply with the all of the 403(b) requirements. If this is completed by March 31, 2020, the plan will also be treated as retroactively complying with the 403(b) requirements for all periods the plan was in place back to January 1, 2010.

In order to be eligible for the relief under the RAP, the 403(b) plan must have been initially adopted on a timely basis. This generally means the later of December 31, 2009 or the plan’s effective date.


When pre-approved 403(b) plan documents are made available, we suggest that all sponsors of 403(b) plans consider whether to restate their plans and adopt a pre-approved document. There are some advantages to doing so, and some potential disadvantages as well. If you want to discuss whether moving to a pre-approved document is the right approach for your plan, please contact the Boutwell Fay attorney with whom you work.



© Boutwell Fay LLP 2017, All Rights Reserved. This handout is for information purposes only, and may constitute attorney advertising. It should not be construed as legal advice and does not create an attorney-client relationship. If you have questions or would like our advice with respect to any of this information, please contact us. The information contained in this article is effective as of February 28, 2017.



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