SECTION 4. RELIANCE BY PUBLIC

SCHOOL EMPLOYERS ON MODEL PLAN LANGUAGE

.01 Amendments . (a) Reliance . If a public school employer amends its plan language to include any portion of the model language, the form of the written plan will be treated as meeting the requirements of § 403(b), to the extent covered by the model plan language that is adopted. This reliance applies only if the employer adopts the model language on a word-for-word basis or adopts an amendment that is substantially similar in all material respects.

(b) Effect on public schools . If a public school employer adopts any portion of the model plan language, the written plan must also be operated in accordance with the amendment, from and after the effective date of the amendment, and the § 403(b) plan must continue to satisfy, in both form and operation, all other requirements of § 403(b) in order to maintain § 403(b) status. To the extent a public school employer’s § 403(b) plan does not include the model plan language or an amendment that is substantially similar in all respects, a public school that requests a private letter ruling from the Internal Revenue Service (IRS) with respect to the qualification of its § 403(b) written plan must clearly highlight and describe in the written request how its plan provisions differ from the model language.

.02 Adoption of written plan . The model language is also designed for use by a public school that does not have a written § 403(b) plan. Thus, adoption of the entire model language (on a word-for-word basis or using language that is substantially similar in all material respects) by a public school has the

State or a local government or for employees of employers that are tax-exempt organizations under § 501(c)(3). Section 403(b) also applies to contributions made for certain ministers. Under § 403(b), contributions are excluded from gross income only if made to certain funding arrangements: (1) contracts issued by an insurance company qualified to issue annuities in a State that includes payment in the form of an annuity; (2) custodial accounts that are exclusively invested in stock of a regulated investment company (as defined in § 851(a) relating to mutual funds); or (3) a retirement income account for employees of a church-related organization (as defined in §1.403(b)–2 of the Income Tax Regulations).

.02 Final regulations under § 403(b) (T.D. 9340, 2007–36 I.R.B. 487) were published in the Federal Register (72 FR 41128) on July 26, 2007 (2007 regulations). The 2007 regulations replaced existing regulations that were published in the Federal Register (29 FR 18356) on December 24, 1964, 1965–1 C.B. 180, that provided guidance for complying with § 403(b), as well as certain provisions of regulations that were published in the Federal Register (60 FR 49199) on September 22, 1995, relating to eligible rollover distributions and regulations that were that were published in the Fed- eral Register (67 FR 18987) on April 17, 2002, relating to minimum distributions under § 401(a)(9). The 2007 regulations reflected the numerous amendments made to § 403(b) by legislation enacted since 1964. Subject to a number of special effective date rules, the 2007 regulations are generally effective for taxable years beginning after December 31, 2008.

.03 The 2007 regulations include comprehensive guidance relating to § 403(b), including the requirement that § 403(b) contracts must be maintained pursuant to a written plan. (References in this revenue procedure to a contract or an issuer include a custodial account under § 403(b)(7) and an issuer of such an account, respectively.) As indicated in the preamble to the regulations, while § 403(b) contracts that are subject to the Employee Retirement Income Security Act of 1974 (ERISA) are already maintained pursuant to written plans, there may be a potential cost associated with satisfying the written plan requirement for those employers that do not have existing

plan documents, such as public schools. This revenue procedure is intended to address this concern by providing model plan language that may be used for this purpose by public schools.

.04 Section 1.403(b)–3(b)(3) of the 2007 regulations requires that contracts be issued under a plan, which, in both form and operation, satisfies the requirements of the 2007 regulations and which contains all the material terms and conditions for eligibility, benefits, applicable limitations, the contracts available under the plan, and the time and form under which benefit distributions would be made. Section 1.403(b)–10(b) of the 2007 regulations includes a special rule for situations in which a contract has been exchanged for another contract, under which the successor contract (an “exchange contract”) is treated as part of the plan if certain conditions are satisfied, including an information sharing agreement between the employer and the issuer. Section 1.403(b)–11(g) of the 2007 regulations provides that those conditions are not imposed with respect to a contract if the exchange occurred before September 25, 2007, and the exchange satisfied applicable requirements at that time (a “grandfathered exchange contract”).