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Federal Tax

IRS Expands Qualified Plan Determination Letter Program to 403(b)s

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

On November 7, 2022, the IRS announced the expansion of one of its retirement plan approval programs. The IRS will now allow 403(b) retirement plans to use the same individually designed retirement plan determination letter program that is used by qualified retirement plans (i.e., 401(k)s). (IR 2022-196 (11/7/2022); Rev Proc 2022-40, 2022-47 IRB)

According to the announcement, beginning June 1, 2023, 403(b) sponsors will be able to:

  • submit determination letter applications for all initial individually designed retirement plans based on the sponsor’s EIN. (Rev Proc 2022-40, Sec. 12)
  • request a determination upon plan termination on a Form 5310, Application for Determination for Terminating Plan, or at any time thereafter without regard to their EIN.

In addition, under the new procedure:

  • the IRS will no longer consider a determination letter issued to a pre-approved retirement plan adopter after filing a Form 5307, Application for Determination for Adopters of Modified Volume Submitter Plans, when determining whether a plan sponsor is eligible to submit that plan for an initial plan determination on a Form 5300, Application for Determination for Employee Benefit Plan, and
  • The IRS will consider in its review qualification requirements (including 403(b) requirements) that are in effect, or have been included on a Required Amendments List, on or before the last day of the second calendar year preceding the year in which the determination letter application is submitted. This review will also be subject to any specific modifications listed on the annual Employee Plans revenue procedure that provides rules for determination letter applications (currently, Rev Proc 2022-4, 2022-1 IRB 161)

Note. These rules will apply to determination letter submissions of all individually designed retirement plans.

The announcement also states that Rev Proc 2023-4, which is currently in development, will be released soon and will contain additional changes to procedural requirements for plan submissions, such as phasing-in mandatory e-filing for determination letter requests.

Form 5300 and Form 5310 will be updated to reflect these changes.

For more information on employee plan determination letters, see Checkpoint’s Federal Tax Coordinator ¶T-9858.1.

 

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