Understanding 403(b) Prototype Plans
A 403(b) Prototype Plan is a defined contribution retirement plan designed to meet the requirements of Internal Revenue Code Section 403(b). The 403(b) Prototype Plan has a Prototype Sponsor (Envoy Financial). The Prototype Sponsor then makes the plan available to employers for their subsequent adoption. Employers who adopted the 403(b) Prototype Plan will then receive a copy of the Favorable IRS Opinion Letter on the Plan Document.
All 403(b) Plan Sponsors (employers) will need to adopt an IRS Pre-Approved Plan. There are no exceptions to this requirement. Further, and as a point of reference, the IRS Pre-Approved Plan Program does not review individually designed 403(b) plans.
A 403(b) Prototype Plan consists of:
(1) Plan Document
This contains all of the plan’s nonelective provisions that apply to all adopting employers.
(2) Adoption Agreement
This allows an adopting employer to select among plan design alternatives available under the basic plan document to customize its plan.
Each Plan Document and Adoption Agreement pair is considered to be a separate 403(b) Prototype Plan.
Required 403(b) Plan Document Restatements
The Plan Document restatement process has been ongoing for other defined contribution plans like 401(k) plans for quite some time. This process is new for 403(b) plans.
Under the required 403(b) restatement process, there is a window of time by which all 403(b) plans need to be restated. This required restatement process requires Plan Sponsors (employers) to adopt a pre-approved plan like the Envoy Financial Pre-Approved 403(b)(7) or 403(b)(9) Plan. Going forward, Plan Sponsors who adopted a pre-approved plan should expect to restate their Plan Documents every six years.