SECTION 5. PROVISIONS

REQUIRED IN EVERY § 403(b) PROTOTYPE PLAN

.01 Subsections .05 though .11 of this section 5 describe provisions that must be included in every § 403(b) prototype plan. Some of these requirements reflect requirements in the 2007 regulations; others derive from the nature and purposes of the prototype plan program and are generally similar to requirements that apply under Rev. Proc. 2005–16 to the Service’s opinion letter program for M&P plans qualified under § 401(a).

2009–18 I.R.B. 920 May 4, 2009

not entitled to reliance on an opinion letter issued with respect to the plan, if:

(1) the eligible employer amends any provision of the plan, including its adoption agreement (other than to (a) change the choice of options or procedures in the adoption agreement, (b) add overriding language in the adoption agreement if necessary to satisfy § 415 because of the required aggregation of multiple plans, or (c) adopt sample or model amendments published by the Service that specifically provide that their adoption by an adopter of an approved § 403(b) prototype plan will not cause such plan to be treated as individually designed); or

(2) the eligible employer chooses to discontinue participation in the plan as amended by the prototype sponsor and does not substitute another approved § 403(b) prototype plan.

.11 The adoption agreement of every § 403(b) prototype plan must satisfy the following requirements:

(1) The adoption agreement must require the adopting employer to indicate whether:

(a) the plan is a governmental plan as defined in § 414(d),

(b) the plan is a nonelecting church plan, or

(c) the adopting eligible employer is an organization described in § 501(c)(3) and the plan is neither a governmental plan as defined in § 414(d) nor a nonelecting church plan.

(2) The adoption agreement must allow the adopting eligible employer to add overriding plan language if necessary to satisfy § 415 because of the required aggregation of multiple plans.

(3) The adoption agreement must identify who: (a) is responsible for the various administrative functions under the plan to comply with the requirements of § 403(b) and other tax requirements, including such requirements that apply on the basis of the aggregated contracts issued to a participant under the plan; and (b) is responsible to maintain a list of all the vendors of annuity contracts and custodial accounts under the plan.

(4) The adoption agreement must contain a dated employer signature line. The eligible employer must sign the adoption agreement when it first adopts the plan and must complete and sign a new adoption agreement if the plan has been restated. In

of § 401(a)(9) will be satisfied regardless of the form of benefit paid, and the distributable events under the plan must be described in the basic plan document and adoption agreement.

.04 As provided in subsection .07 of this section 5, the terms of the basic plan document and adoption agreement must override any inconsistent provisions of investment arrangements under the plan or documents incorporated by reference. An eligible employer that adopts a § 403(b) prototype plan should take this and the other requirements of this section 5 into account in considering investment arrangements to be offered under the plan as well as other documents that may be incorporated by reference.

.05 Every § 403(b) prototype plan must satisfy the requirements of §§ 1.403(b)–1 through 1.403(b)–11, including the following requirements:

(1) The plan must contain all the material terms and conditions for eligibility, benefits, applicable limitations, the investment arrangements available under the plan, and the time and form under which benefit distributions will be made.

(2) The plan must satisfy the universal availability requirement with respect to elective deferrals described in § 1.403(b)–5(b), whether or not this requirement is applicable to the plan under § 1.403(b)–5.

(3) The plan must limit the amount of compensation that can be taken into account with respect to any contribution under the plan to the limitation in effect under § 401(a)(17), whether or not this limitation is applicable to the plan under § 1.403(b)–5.

(4) Unless the plan is designed by the prototype sponsor to be available for adoption only as a governmental plan as defined in § 414(d) or a church plan as defined in § 414(e) for which the election under § 410(d) has not been made (a “nonelecting church plan”), the plan must include terms that satisfy the applicable requirements of § 401(m) if the plan provides for matching or after-tax employee contributions.

(5) The plan must set forth the terms governing any hardship distributions, loans, plan-to-plan transfers, contract-to-contract exchanges, and rollovers into the plan that are available under the plan.

.06 Every § 403(b) prototype plan must provide for full and immediate vesting of all contributions under the plan.

.07 Every § 403(b) prototype plan must provide that in the event of any conflict between the terms of the plan and the terms of any annuity contract or custodial account under the plan, or of any other document that is incorporated by reference in the plan, the terms of the plan shall control.

.08 Every § 403(b) prototype plan must provide a procedure for amendment of the plan by the prototype sponsor, so that changes in the Code, regulations, revenue rulings, or other guidance published by the Service, or corrections of prior approved plans, may be applied to all eligible employers that have adopted the plan.

.09 Under § 1.415(f)–1(a)(3), all § 403(b) annuity contracts purchased by an employer for a participant are treated as one § 403(b) annuity contract for purposes of § 415. Every § 403(b) prototype plan must include plan language reflecting this rule. In particular, the plan language must coordinate the application of the § 415 limits to all the § 403(b) prototype plans of the adopting eligible employer and its related employers so that, if the only § 403(b) plans maintained by the adopting employer and its related employers are prototype plans, the plans will satisfy § 415(c) and § 1.415(f)–1(a)(3) without requiring the addition of overriding plan language. The plan language must also allow the adopting eligible employer to add overriding language to the adoption agreement if necessary to coordinate the application of the § 415 limits where the adopting eligible employer or its related employers also maintain § 403(b) plans that are not prototype plans. For this purpose, the term “related employers” means all employers that are aggregated with the adopting eligible employer under § 414(b) and (c) (each as modified by § 415(h)), (m), and (o), including § 1.414(c)–5. Sample language provided in the Listing of Required Modifications (for § 403(b) plans) may be downloaded from the Internet at the following address: (http://www.irs.gov/pub/irs- tege/draft_lrm_403b_prototypes.pdf) .

.10 Every § 403(b) prototype plan must provide that the eligible employer is considered to have adopted an individually designed plan, and the eligible employer is

May 4, 2009 921 2009–18 I.R.B.

bors described in § 1.401(a)(4)–2(b)(2) with respect to such contributions.

(4) The plan must define compensation for purposes of determining the amount of contributions other than elective deferrals as total compensation. For this purpose, total compensation means a definition of compensation that includes all compensation within the meaning of § 415(c)(3) (disregarding § 415(c)(3)(E)) and excludes all other compensation, or that otherwise satisfies § 414(s) under § 1.414(s)–1(c).

.03 A nonstandardized plan is a § 403(b) prototype plan that is not a standardized plan.