The IRS has recently issued two revenue procedures that affect 403(b) plans and present opportunities for 403(b) plan sponsors:
New procedures for plan correction. IRS Revenue Procedure2013-12 updates the Employee Plans Corrections and Resolution System (“EPCRS”) to include more opportunities for correction of 403(b) plans.Particular points of interest are in the portion of EPCRS known as the Voluntary Correction Program (“VCP”)— No increase in VCP application fees; 403(b) plans may now use VCP to correct plan document failures; New VCP forms and procedures as of April1, 2013. Pros and Cons: VCP can be a great tool for efficient plan correction and it’s always welcome news to hear that filing fees have not gone up, but watch out for an increase in the cost of preparation anyway, due to new requirements that VCP applications provide more details about plan disqualifications and proposed corrections.
Temporary 50% discount for correction of 2009 plan adoption failure. Revenue Procedure 2013-12 also provides that until the end of 2013 only, 403(b) plans will only pay 50% of the usual VCP fee, provided the only error that requires correction is the plan’s failure to have adopted a plan document by the December 31, 2009 deadline as required by the regulations. Pros and Cons: How often does the IRS have a sale on fees? Clearly, this is a great opportunity for cost-conscious 403(b) sponsors looking for a break. On the other hand, the implied message from the IRS that goes along with this incentive pricing is that after 2013, not only will VCP fees go back up to normal, but the IRS will probably be much less flexible with 403(b) plans that fail to correct the 2009 plan document failure by the end of this year.
New pre-approved plan document program. The IRS has just issued Revenue Procedure 2013-22,which describes the long-awaited program of pre-approval for 403(b) plan documents. Within the next few years, 403(b) plan sponsors will have the opportunity to purchase pre-approved plan documents and model interim amendments from document providers.
For more information on correcting 403(b)plan failures using the Voluntary Correction Program, go to the IRS 403(b) Plan Fix-It Guide at http://www.irs.gov/Retirement- Plans/403(b)-Plan-Fix-It-Guide.
For more information, please contact us: Boutwell Fay LLP
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