IRS Updates Opinion Letter Procedures for Pre-approved § 403(b) Plans

On September 1, 2021, the IRS released Rev. Proc. 2021-37, which modifies the opinion letter procedures for pre-approved § 403(b) plans to be more consistent with the procedures applicable to pre-approved qualified § 401(a) plans. The guidance also addresses the deadlines for plan amendments to comply with § 403(b) requirements.

An opinion letter is a written statement issued by the IRS that indicates whether the form of a plan document satisfies the applicable Code requirements. The opinion letter process requires the plan document to be submitted to the IRS within certain prescribed timeframes or cycles. Previous guidance, including Rev. Proc. 2013-22, outlined the submission process for the initial or Cycle 1 pre-approved § 403(b) plan opinion letters. Rev. Proc. 2021-37 describes the submission process for Cycle 2 opinion letters.

The updates under Rev. Proc. 2021-37 include the elimination of the distinction between prototype and volume submitter plans. Essentially, these plans will now be covered by one program for standardized and non-standardized documents. The document format can be either a single document or an adoption agreement plan.

An employer who amends a non-standardized plan document could potentially lose reliance upon an issued opinion letter. However, the procedures allow such an employer to file Form 5307 to request an individual determination letter for the plan.

The IRS intends to issue a cumulative list of changes that identifies the requirements that the IRS will take into account in reviewing § 403(b) pre-approved plans submitted for Cycle 2. This list will be provided prior to the beginning of the Cycle 2 on-cycle submission period, which will run from May 2, 2022, to May 1, 2023.

Rev. Proc. 2021-37 extends the deadline for making interim amendments with respect to a change in
§ 403(b) requirements, for most plans, until the end of the second calendar year following the calendar year in which the change is effective. The procedure also addresses the limited extension of the Cycle 1 remedial amendment period, which otherwise ended on June 30, 2020.

Additionally, the procedure provides rules for allowing employees of church-related organizations to participate in a 403(b) approved plan intended to be a retirement income account, and guidance regarding the corresponding required amendments.

Sponsors of 403(b) retirement plans should be aware of the updated opinion letter procedures and consult with their counsel and document providers for further information. The IRS invites comments regarding Rev. Proc. 2021-37, which can be submitted in accordance with the instructions provided therein.

Revenue Procedure 2021-37 »