SECTION 2. BACKGROUND

.01 Contributions for an annuity contract purchased for an employee by an eligible employer are generally excluded from the employee’s gross income if the requirements described in § 403(b) are met. Amounts paid by an eligible employer to a custodial account which satisfies the requirements of § 401(f)(2) are treated as contributed to an annuity contract for an employee if the requirements of § 403(b)(7)(A)(i) and (ii) are met. A retirement income account, within the meaning of § 403(b)(9)(B), for employees of a Church-related organization, within the meaning of § 1.403(b)–2(b)(6) of the Treasury regulations, is treated as an annuity contract. For purposes of this

revenue procedure, and except as otherwise indicated, an eligible employer is a public school, an employer described in § 501(c)(3) that is exempt from tax under § 501(a), an employer of a minister described in § 414(e)(5)(A) with respect to the minister, or a minister described in § 414(e)(5)(A) with respect to a retirement income account established for the minister.

.02 The 2007 regulations (as defined in section 3.01) were generally effective as of January 1, 2009.

.03 Sections 1.403(b)–3(b)(3) and 1.403(b)–9(a)(2)(ii) of the 2007 regulations provide that an annuity contract, custodial account, or retirement income account generally does not satisfy the requirements of § 403(b) unless it is maintained pursuant to a plan. A plan means a written defined contribution plan that, in both form and operation, satisfies the requirements of the 2007 regulations. Subsequent references in this revenue procedure to the requirements of § 403(b) include the requirements of the 2007 regulations.

.04 The Service has not heretofore maintained a program for the issuance of opinion and advisory letters regarding the acceptability of the form of a plan under § 403(b). However, the Service has on occasion issued private letter rulings regarding the excludability of contributions for a contract or account under § 403(b).

2013–18 I.R.B. 986 April 29, 2013

(2) the requirements of § 1.403(b)–6(c) restricting distributions are satisfied with respect to amounts in the account;

(3) the assets in the account cannot be used for, or diverted to, purposes other than the exclusive benefit of plan participants and their beneficiaries; and

(4) the account is not part of a retirement income account.

.06 Eligible employer means an employer described in § 403(b)(1)(A).

.07 Governmental plan means a governmental plan within the meaning of § 414(d).

.08 Investment arrangement means the funding arrangement(s) under a § 403(b) plan and includes an annuity contract, custodial account, and, in the case of a § 403(b) plan for the employees of a Church-related organization, a retirement income account .

.09 The term mass submitter has the meaning given in section 11.03.

.10 The term minor modifier has the meaning given in section 11.03.

.11 Non-qualified church-controlled organization or Non-QCCO means a church-controlled tax-exempt organization described in § 501(c)(3) that is not a qualified church-controlled organization within the meaning of § 3121(w)(3)(B).

.12 The term nonstandardized plan has the meaning given in section 6.03.

.13 Prototype sponsor means a person meeting the eligibility requirements of section 11.01 or section 11.03 that submits an application for an opinion letter for a § 403(b) prototype plan under this revenue procedure.

.14 Qualified church-controlled organ- ization or QCCO means a church-controlled tax-exempt organization described in § 501(c)(3) that is a qualified church-controlled organization within the meaning of § 3121(w)(3)(B).

.15 Retirement income account means a defined contribution program established or maintained by a Church-related organization to provide benefits under § 403(b) for its employees or their beneficiaries as described in § 1.403(b)–9.

.16 Section 403(b) pre-approved plan means a plan that is either a § 403(b) prototype plan or a § 403(b) volume submitter plan.

.17 The term § 403(b) prototype plan has the meaning given in section 5.

sponsors of § 403(b) plans with respect to the requirement to have a written § 403(b) plan in place by January 1, 2009. Notice 2009–3 provides that the Service will not treat a § 403(b) plan as failing to satisfy the requirements of § 403(b) during the 2009 calendar year, provided that:

(1) on or before December 31, 2009, the sponsor of the plan has adopted a written § 403(b) plan that is intended to satisfy the requirements of § 403(b) (including the 2007 regulations) effective as of January 1, 2009; (2) during 2009, the sponsor operates the plan in accordance with a reasonable interpretation of § 403(b), taking into account the 2007 regulations; and

(3) before the end of 2009, the sponsor makes its best efforts to retroactively correct any operational failure during the 2009 calendar year to conform to the terms of the written § 403(b) plan, with such correction to be based on the general principles of correction set forth in the Service’s Employee Plans Compliance Resolution System (EPCRS) at section 6 of Rev. Proc. 2008–50, 2008–35 I.R.B. 464.

The relief in Notice 2009–3 applies solely with respect to the 2009 calendar year and may not be relied on with respect to the operation of a § 403(b) plan or correction of operational defects in any prior or subsequent year.

.08 Announcement 2009–34, 2009–18 I.R.B. 916, asked for public comments on a draft revenue procedure for pre-approving the form of § 403(b) prototype plans and on draft sample plan language that can be used in writing these plans.

.09 Announcement 2009–89, 2009–52 I.R.B. 1009, provides that if a plan sponsor adopts a written § 403(b) plan on or before December 31, 2009, that is intended to satisfy the requirements of § 403(b), the sponsor will have a remedial amendment period in which to correct defects in the form of the plan, retroactive to January 1, 2010, provided that the plan sponsor timely adopts a pre-approved § 403(b) plan with an opinion letter or timely applies for an individual determination letter.

.10 Rev. Rul. 2011–7, 2011–10 I.R.B. 534, provides guidance clarifying how the 2007 regulations apply when a § 403(b) plan is terminated.

.11 Announcement 2011–82, 2011–52 I.R.B. 1052, describes changes to the de

termination letter program for plans qualified under § 401(a) that were first effective in 2012. Rev. Proc. 2013–6, 2013–1 I.R.B. 198, which sets forth the procedures for issuing determination letters for qualified plans, reflects the changes described in Announcement 2011–82. These changes resulted from the Service’s reevaluation of how best to allocate its limited resources to help taxpayers understand and comply with the law. These changes eliminate features of the determination letter program that are of limited utility ( i.e., elective demonstrations of a plan’s satisfaction of nondiscrimination requirements) and limit the types of pre-approved qualified plans that may obtain individual determination letters. As a result of these changes, determination letters for qualified plans will no longer take into account, or provide reliance with respect to, certain issues, and determination letters for qualified plans that are based on the plan’s pre-approved status will only be issued with respect to volume submitter plans that include minor modifications to the pre-approved volume submitter specimen plan. These resource allocation considerations are also reflected in the approach taken in this revenue procedure.