Yesterday, the IRS issued Rev. Proc. 2014-28, extending the deadline for plan document providers to submit applications to the IRS for pre-approval of prototype and volume submitter plan documents from April 30, 2014 to April 30, 2015. While this 1-year extension may not seem like much at first read, it is monumental.
First, for the tiny part of the industry which actually writes 403(b) plan documents, this change signals a sea-changing event. Not only does Rev. Proc. 2014-28 give plan document providers a little more time to submit their proposed prototype and volume submitter plan documents to the IRS for opinion/advisory letters, it also reduces the number of required sponsors from 30 to 15, perhaps signaling that the IRS understands how difficult it has been for the plan document provider community to get educational institutions and non-profits to buy-in to the IRS idea that if they want the advantages gained by utilizing pre-approved prototype and volume submitter plan documents, then some of them must step forward and bear the burden of sponsoring those documents. Rev. Proc. 2014-28 doesn’t say why the IRS feels 15 sponsors is the more appropriate number of sponsors, or why the IRS decided not to completely eliminate this requirement. Rumor has it that the IRS did not eliminate this requirement in its entirety because the Service is concerned about being flooded with applications for 403(b) opinion/advisory letters for prototype and volume submitter plan documents. Because Rev. Proc. 2014-28 did not reduce or eliminate the fee to submit these applications, which starts at $14,000, it is doubtful that this rumor is true.
Second, for the rest of the industry, it is not what Rev. Proc. 2014-28 says but what it doesn’t say, which is important. Remember, when the IRS imposed the written plan document requirement on 403(b) plans with the Final 403(b) Regulations, the Service created a remedial amendment period for 403(b) plan documents. That remedial amendment period ends when the first restatement period for pre-approved 403(b) prototype and volume submitter plan documents ends, so moving the submission deadline also impacts this remedial amendment period, which is something Rev. Proc. 2014-28 does not address.
Additionally, Rev. Proc. 2014-28 does not discuss whether/if/when 403(b) plan document will follow the 6-year defined contribution restatement cycle set forth in Rev. Proc. 2007-44. For small educational institutions and non-profits concerned with the cost of implementing and maintaining a 403(b) plan, the cost of periodically restating the plan document is an important part of the conversation.
We will discuss these issues in detail in our upcoming live web seminar “403(b) Plan Document Update 2014” on Thursday, May 15, from 2pm to 3:40pm ET. The cost to attend is $50 for each individual. Individuals registered for our 16 Credit Hours for $195 seminar package can attend as part of their package at no additional charge. Group packages are available.