New 2nd Cycle guidance for 403(b) pre-approved plans and interim amendment changes for 401(a) plans

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Updated IRC 403(b) Pre-Approved Program for Cycle 2

Revenue Procedure 2021-37 provides procedures for issuing opinion letters for IRC 403(b) pre-approved plans for the second remedial amendment cycle (Cycle 2). It sets the submission period for providers and mass submitters to submit on-cycle applications for Cycle 2 opinion letters starting on May 2, 2022, and ending on May 1, 2023.

It also sets the remedial amendment periods for IRC 403(b) pre-approved plans. Many of the changes reflect improvements from the current IRC 401(a) pre-approved program as well as providing other new enhancements. Highlights of these changes include:

• Extends the deadline to adopt interim amendments for a change in IRC 403(b) requirements. Most 403(b) plans will have until the end of the second calendar year following the calendar year in which the change is effective.
• Provides a new Determination Letter program for amended pre-approved plans on Form 5307, similar to the current IRC 401(a) pre-approved program.
• Provides details on the system of remedial amendment periods that follows the initial remedial amendment period.
• Replaces prototype and volume submitter plans with a single opinion letter program.
• Provides that the IRS will issue a Cumulative List identifying the IRC 403(b) requirements that we will review for in plans submitted for each cycle.

Employees of certain church-related organizations, described in IRC 414(e)(3)(B), are allowed to participate in a pre-approved retirement income account (RIA) plan for Cycle 2. Also, a Cycle 1 pre-approved RIA plan may be retroactively amended to July 1, 2020, to permit the participation of these same employees. An amendment to the Cycle 1 plan done in good faith does not affect an employer’s ability to continue to rely on the Cycle 1 opinion or advisory letter. However, there will be no reliance on the amendment itself.

If you have any questions about Rev. Proc. 2021-37, contact Cameron Kalchert at Cameron.R.Kalchert@irs.gov or 513-975-6381.

Changes to Interim Amendments Deadlines for IRC 401(a) Pre-approved Plans

Revenue Procedure 2021-38 modifies the deadline for adopting interim amendments for IRC 401(a) pre-approved plans. For disqualifying provisions that are effective after December 31, 2020, interim amendments must be adopted by the end of the second calendar year following the calendar year in which the change in qualification requirements is effective with respect to the plan.

For disqualifying provisions that were effective on or before December 31, 2020, an interim amendment continues to be timely if it’s adopted by the end of the remedial amendment period described in section 2.07 of Rev. Proc. 2016-37.

This new deadline also applies to adopters of IRC 401(a) pre-approved plans that are maintained by more than one employer or by tax-exempt employers. The interim amendment deadline that applies to governmental employers is also modified. This change ensures that the deadline for amending IRC 401(a) pre-approved plans is consistent with the deadline for IRC 403(b) pre-approved plans outlined in Rev. Proc. 2021-37.

If you have any questions about Rev. Proc. 2021-38, contact Cameron Kalchert at Cameron.R.Kalchert@irs.gov or 513-975-6381.