The IRS has, effective immediately, expanded the individually designed retirement plan determination letter program to include certain 403(b) plans.
The IRS announced on Nov. 7 in Revenue Procedure (Rev. Proc.) 2022-40 that it will now allow 403(b) retirement plans used by certain public schools, churches and charities to use the same individually designed retirement plan determination letter program currently used by qualified retirement plans, such as 401(k)s. The change became effective immediately.
Highlights of the changes announced in Rev. Proc. 2022-40 include:
- Expansion for initial plan determination. It modifies Rev. Proc. 2016-37 to permit 403(b) plan sponsors, beginning June 1, 2023, to submit determination letter applications for all initial individually designed retirement plans based on the sponsor’s Employer Identification Numbers (EINs).
- Form defects. It modifies the definition of form defect, under Rev. Proc. 2019-39, regarding a provision in, or an absence of a provision from, a 403(b) plan that is integral to a change in Code Section 403(b) requirements. Rev. Proc. 2022-40 also modifies the structure of the definition of form defect as set forth in Rev. Proc. 2019-39.
- Remedial amendments. Rev. Proc. 2022-40 incorporates the provisions of Rev. Proc. 2019-39 relating to the remedial amendment period for 403(b) individually designed plan form defects first occurring after June 30, 2020.
It also extends the expiration of the remedial amendment period for a disqualifying provision regarding a provision of a new plan or the absence of a provision from a new plan to the last day of the second calendar year following the calendar year in which the plan is put into effect.
Rev. Proc. 2022-40 also extends the expiration of the remedial amendment period for a disqualifying provision regarding a provision of a new governmental plan within the meaning of Code Section 414(d) or the absence of a provision from such a plan to the later of: (1) the last day of the second calendar year following the calendar year in which the plan is put into effect; or (2) 90 days after the close of the third regular legislative session of the legislative body with the authority to amend the plan that begins after the end of the plan’s initial plan year.
- Terminations. Beginning June 1, 2023, 403(b) retirement plan sponsors may also request a determination letter upon plan termination on a Form 5310, Application for Determination for Terminating Plan, or at any time thereafter without regard to their EIN.
- Prior letter issued to a Pre-approved Plan adopter not treated as an initial plan determination. A determination letter issued to an adopter of a pre-approved retirement plan as a result of filing a Form 5307, Application for Determination for Adopters of Modified Volume Submitter Plans, is no longer considered in determining whether a plan sponsor is eligible to submit that plan for a determination letter for an initial plan determination on a Form 5300, Application for Determination for Employee Benefit Plan.
- Scope of review. The IRS generally will consider, in its review, qualification requirements and Code Section 403(b) requirements that are in effect, or that have been included on a Required Amendments List, on or before the last day of the second calendar year before that in which the determination letter application is submitted. It adds that this change is subject to any specified modifications on the annual Employee Plans revenue procedure that provides the administrative and procedural rules for submitting determination letter applications, currently Rev. Proc. 2022-4.
These rules will apply to submissions of all individually designed retirement plans.
Comments Invited on Other Plan Types
The IRS is requesting comments on specific types of plans for which it and the Treasury Department should consider accepting determination letter applications:
- in circumstances other than for an initial plan determination;
- for a determination upon plan termination; and
- for a determination regarding merged plans.
The IRS notes that comments that suggest expanding the scope of the program for a particular type of plan should not merely state the type of plan, but should also specify the issues applicable to that type of plan that would justify review under the determination letter program, such as specific plan features, special plan designs applicable to that type of plan, or unresolved questions regarding whether that type of plan satisfies the qualification requirements or Code Section 403(b) requirements.
Comments should be submitted in writing by Feb. 28, 2023, and should include a reference to Rev. Proc. 2022-40. Comments may be submitted:
- electronically via the Federal eRulemaking Portal at www.regulations.gov (type “IRS Revenue Procedure 2022-40 in the search field on the Regulations.gov home page to find this revenue procedure and submit comments); or
- by mail to: the Internal Revenue Service, Attn: CC:PA:LPD:PR (Rev. Proc. 2022-40), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044.