Compliance News | November 15, 2022
The IRS will allow sponsors of individually designed 403(b) plans to submit determination letter applications. Pre-approved 403(b) plans already have a program that allows them to get IRS approval.
Submission dates are governed by the last digit of plans’ Employer Identification Numbers (EINs). The first group of plans can start submitting June 1, 2023. There is no end date for submissions.
Additionally, the IRS is interested in comments on other types of plans that should be able to apply for a determination letter.
Only tax-exempt organizations under section 501(c)(3) of the Internal Revenue Code, public schools and churches are allowed to maintain 403(b) plans. Since 2009, the IRS has required sponsors of 403(b) plans to have a written plan document. In 2013, the IRS opened an approval program for pre-approved 403(b) plans but did not allow individually designed 403(b) plans to apply for a determination letter because of lack of resources.
Sponsors of qualified plans have been allowed to apply for determination letters for some time if the plan is a new or terminating plan or is involved in a corporate merger. The IRS is working on a separate update of the revenue procedure to address the procedures for qualified plans.
The following table notes how the submission start date will vary depending on EIN.
Start Dates for Determination Letter Applications by Sponsors of 403(b) Plans
|Last Number of Sponsor’s EIN||Submission Start Date|
|1, 2 or 3||June 1, 2023|
|4, 5, 6 or 7||June 1, 2024|
|8, 0 or 0||June 1, 2025|
In addition to expanding the 403(b) program, Revenue Procedure 2022-40 makes other changes in the determination letter program, which affect qualified plans as well as 403(b) plans, including these:
The IRS asks for comments on other types of plans that should be able to apply for a determination letter. Specifically, the IRS wishes to know whether plans that cannot now request a determination letter should be allowed to submit. The IRS is also seeking to gauge if there is interest in whether plans with new plan designs need the determination letter program. Finally, the IRS is studying whether certain types of plans that cannot convert to pre-approved plan documents should be able to submit. For example, multiemployer plans are banned from the pre-approved program and large plans have great difficulty in using the pre-approved program.
The IRS requests comments by February 28, 2023. Comments should specify not only the type of plan but the specific plan features and designs that need IRS review because of unresolved questions.
This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.
Don't miss out. Join 16,000 others who already get the latest insights from Segal.