On November 22, 2024, the Internal Revenue Service (IRS) issued Announcement 2024-38, noting the following with respect to pre-approved plans.
Opinion letters for Cycle 2 §403(b) pre-approved plans issued by November 29, 2024
In the announcement, the IRS stated its intention to issue opinion letters for §403(b) pre-approved plans filed during the second six-year remedial amendment cycle (Cycle 2) by November 29, 2024, or shortly thereafter. In general, IRS opinion letters are issued to pre-approved plan document providers each restatement cycle and provide reliance to plan sponsors that their pre-approved plans meet all legal requirements for that restatement cycle, in this case, including the 2022 Cumulative List of Changes in Notice 2022-8.
Deadline for adopting a §403(b) pre-approved plan under Cycle 2
The announcement states that “an employer intending to maintain a §403(b) pre-approved plan for Cycle 2 for §403(b) pre-approved plans must adopt that pre-approved plan on or before December 31, 2026.”
Determination letters for Cycle 2 §403(b) pre-approved plans
Eligible employers that adopt a Cycle 2 §403(b) pre-approved plan may apply for an individual determination letter from January 1, 2025, through December 31, 2026. Guidance on eligibility and filing requirements are found in section 25 of Rev. Proc. 2023-37. In general, an employer is eligible to apply for a determination letter if they have a nonstandardized pre-approved §403(b) plan with additional modifications to the terms of the plan that are not extensive (as determined by the IRS), or any pre-approved plan modified only to incorporate benefit limits under §415 and top-heavy rules under §416 (for qualified pre-approved plans) due to required plan aggregation. Certain other plans may be eligible as exceptions to this general rule.
Procedural restatement rule for all pre-approved plans
The announcement notes that “future guidance will clarify that the restatement rule in Rev. Proc. 2019-39 and Rev. Proc. 2016-37 continues to apply to all pre-approved plans, including Cycle 2 (and future) §403(b) pre-approved plans and Cycle 4 (and future) qualified pre-approved plans.” The restatement rule provides that a plan restatement does not replace any interim plan amendments that are effective before or after the restatement date that were not incorporated into the restatement if the plan is operated in compliance with those interim amendments.
Please contact your Milliman consultant with any questions.