SECTION 7. WHAT IS A § 403(b)

VOLUME SUBMITTER PLAN?

.01 The term “§ 403(b) volume submitter plan” refers to either a “specimen § 403(b) plan” of a volume submitter practitioner or a plan of a client of the volume submitter practitioner that is substantially similar to the volume submitter’s approved specimen plan. For this purpose, an employer’s plan is not substantially similar to an approved specimen § 403(b) plan, and will be considered to be an individually designed plan rather than a pre-approved plan, if the Service determines (for example, during an examination of the plan) that differences between the terms of the employer’s plan and the terms of the approved specimen plan are so extensive or complex as to be incompatible with the pre-approved plan program. (A § 403(b) volume submitter plan is one of two types of § 403(b) pre-approved plans, the other being a § 403(b) prototype plan which is described in section 5 of this revenue procedure.) See section 11 of this revenue procedure regarding the entities that are permitted to sponsor a § 403(b) volume submitter specimen plan. A “specimen § 403(b) plan” is a model plan document (rather than the actual plan of an eligible employer) of a volume submitter that is intended to satisfy the requirements of § 403(b). A specimen § 403(b) plan is not required to, but may, include an adoption agreement. If more than one adoption agreement may be used with a specimen § 403(b) plan, each specimen plan/adoption agreement pair is a separate volume submitter plan. If an adoption agreement is used for a volume submitter plan, it must satisfy the requirements for prototype adoption agreements in section 9.03.

.02 A § 403(b) volume submitter plan that is adopted by an eligible employer is a single plan regardless of whether there are multiple investment arrangements or multiple vendors (that is, insurance companies or regulated investment company custodians) under the plan. Adoption of two § 403(b) volume submitter plans constitutes the adoption of two separate § 403(b) plans, regardless of whether both plans are substantially similar to a single specimen § 403(b) plan.

.03 A volume submitter may maintain more than one specimen plan. For example, a volume submitter may maintain

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that the terms of the investment arrangement shall govern in the event of any conflict between the terms of the arrangement and the terms of the pre-approved plan. An eligible employer that adopts a § 403(b) pre-approved plan should take this requirement into account in considering investment arrangements to be offered under the plan as well as other documents that may be incorporated by reference. Since the terms of investment arrangements under a § 403(b) pre-approved plan must be incorporated by reference into the plan and those arrangements may not have any provisions that are inconsistent with § 403(b), plan terms that are required in a pre-approved plan under this section 8 or section 9 or 10 should not create a conflict with the terms of the investment arrangements under a properly drafted § 403(b) pre-approved plan. If there nevertheless is such a conflict, the terms of the pre-approved plan must control. For sample plan language for § 403(b) pre-approved plans, see: http://www.irs.gov/pub/irs- tege/403b_lrm0313.pdf .

.06 Every § 403(b) pre-approved 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), unless the adopting eligible employer is a Church or QCCO.

(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), unless the adopting eligible employer is a Church or QCCO. The plan may provide that, if the plan is a governmental plan, the transition rule in § 1.401(a)(17)–1(d)(4)(ii) will be applied in determining the amount of a participant’s compensation that may be taken into account.

(4) Unless the plan is designed by the prototype sponsor or volume submitter to be available for adoption only as a governmental plan or by a Church or QCCO, the plan must include terms that satisfy the

or any other documents incorporated by reference.

.03 For example, an eligible employer’s § 403(b) prototype plan may offer both investment arrangements that permit loans and investment arrangements that do not. In this case, (1) the basic plan document must include provisions reflecting the requirements of the 2007 regulations, including § 1.403(b)–6, and § 1.72(p)–1, and (2) the basic plan document and adoption agreement, as completed by the employer, must provide that, to the extent permitted by the terms governing the applicable investment arrangement, participant loans are available. Similarly, an eligible employer’s § 403(b) volume submitter plan must satisfy the requirements described in the preceding sentence if the plan offers both investment arrangements that permit loans and investment arrangements that do not. For sample plan language that satisfies these requirements, see the Listing of Required Modifications (for § 403(b) plans) which may be downloaded from the Internet at the following address: http://www.irs.gov/pub/irs- tege/403b_lrm0313.pdf . The following are additional examples that illustrate the application of section 8.03:

(1) A § 403(b) pre-approved plan may provide that the forms of annuity benefit available under the plan are those described in the investment arrangements under the plan. However, the terms of the basic plan document and adoption agreement or the volume submitter plan, as applicable, must ensure that the required minimum distribution requirements 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 or the volume submitter plan, as applicable.

(2) A § 403(b) pre-approved plan may provide that hardship distributions of elective deferrals are available to the extent permitted under each investment arrangement under the plan. In this case, the basic plan document and adoption agreement or the volume submitter plan must either provide that hardship distributions are available only for the financial needs described in § 1.401(k)–1(d)(3)(iii)(B) or must set forth nondiscriminatory and objective standards for determining the existence of an immediate and heavy fi

nancial need. In addition, the basic plan document and adoption agreement or the volume submitter plan must provide that the participant’s elective deferrals will be suspended for 6 months following the hardship distribution and set forth the other requirements that must be satisfied for a distribution to be treated as necessary to satisfy the financial need. The terms of any agreement governing the relationship between the vendor of an investment arrangement under the plan and the employer must provide that the vendor will timely notify the employer of a participant’s hardship distribution and the requirement to suspend the participant’s elective deferrals.

.04 A § 403(b) pre-approved plan includes the investment arrangements under the plan in addition to the basic plan document and adoption agreement or the volume submitter plan. Every § 403(b) preapproved plan must therefore incorporate by reference the terms of the investment arrangements under the plan. While the Service’s review of an application for an opinion or advisory letter is limited to the terms of the basic plan document and adoption agreement or the volume submitter plan, as applicable, the terms of investment arrangements and other documents that are incorporated by reference must satisfy applicable law and may not have any provisions that are inconsistent with § 403(b). For example, if the forms of annuity benefit available under a plan are described in investment arrangements under the plan, the terms of the investment arrangements must satisfy, if applicable to the plan, the joint and survivor annuity requirements of section 205 of ERISA and any applicable related rules, such as rules relating to transfers of benefits that are subject to the joint and survivor annuity requirement, and may not have any provisions that are inconsistent with § 403(b).

.05 Every § 403(b) pre-approved plan must provide that, in the event of any conflict between the terms of the pre-approved plan and the terms of investment arrangements under the plan (or of any other documents incorporated by reference into the plan), the terms of the pre-approved plan shall govern. Furthermore, an eligible employer may not rely on an opinion or advisory letter issued with respect to a § 403(b) pre-approved plan if any investment arrangement under the plan provides

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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. Every § 403(b) prototype plan 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 if 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/403b_lrm0313.pdf .

.02 Every § 403(b) prototype plan must provide that the eligible employer will be considered to have adopted an individually designed plan, and the eligible employer is 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 the adoption agreement (other than (a) to change the choice of options in the adoption agreement, (b) to add overriding language in the adoption agreement if necessary to satisfy § 415 because of the required aggregation of multiple plans, (c) to change information in the required appendix described in section 8.08, or (d) to 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.

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

applicable requirements of § 401(m) if the plan provides for matching or other contributions that are subject to the requirements of § 401(m).

(5) The plan must set forth the terms governing all of the plan’s provisions relating to benefits, including any hardship distributions and other distribution events, loans, plan-to-plan transfers, contract-tocontract exchanges, and contributions and rollovers into the plan that are available under the plan, and may incorporate by reference the specific terms and conditions for those benefits set forth in the investment arrangements.

.07 The plan may provide a vesting schedule for nonelective employer contributions, rather than provide for full and immediate vesting of such contributions. Except in the case of certain volume submitter plans, as described below, nonelective employer contributions (and earnings thereon) under a § 403(b) pre-approved plan must vest at least as rapidly as would be required to satisfy the minimum vesting requirements of § 411(a)(2)(B), if the plan were a qualified plan under § 401(a), even if the plan is not subject to the parallel minimum vesting requirements under section 203 of ERISA. A volume submitter plan document that is designed to be used for a plan that is not subject to the minimum vesting requirements of section 203 of ERISA (for example, because the plan is a governmental plan) is not required to provide that nonelective employer contributions will vest at least as rapidly as would be required to satisfy § 411(a)(2)(B). Every § 403(b) pre-approved plan that provides a vesting schedule for nonelective employer contributions must also satisfy the following requirements: (i) the portion of a participant’s interest in the plan that is not vested must be maintained in a separate account for the participant that is treated as a separate contract to which § 403(c) (or, in case of a custodial account, § 401(a)) applies; (ii) as amounts in the participant’s separate account become nonforfeitable, they must be removed from the separate account and treated as amounts held under a § 403(b) plan, to the extent permitted under § 1.403(b)–3(d)(2)(ii); and (iii) all nonvested amounts remaining in the participant’s separate account must become nonforfeitable upon termination of the plan.

.08 Every § 403(b) pre-approved plan must provide that an appendix to the plan will identify the parties responsible for the various administrative functions under the plan to comply with the requirements of § 403(b) and other tax requirements, including the requirements that apply on the basis of the aggregated investment arrangements issued to a participant under the plan, and will list all the vendors of investment arrangements approved for use under the plan, including sufficient information to identify the approved investment arrangements. Changes to the information in the required appendix will not affect the employer’s ability to rely on an opinion or advisory letter.

.09 Every § 403(b) pre-approved plan must provide a procedure for amendment of the plan by the prototype sponsor or volume submitter practitioner, as applicable, 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.

.10 Every § 403(b) pre-approved plan must provide that the prototype sponsor or volume submitter, as applicable, will inform the adopting eligible employer of any amendments made to the plan and will notify the employer of the discontinuance or abandonment of the plan.