In November 2022, the IRS announced, in Revenue Procedure 2022-40, the expansion of one of their programs for approving retirement plans. The IRS will now allow individually designed Code Sec. 403(b) retirement plans, which are used by certain public schools, churches, and charities, to use the same determination letter program currently used by individually designed qualified retirement plans. These rules will apply to submissions of all individually designed retirement plans and these changes are effective beginning on June 1, 2023.
Highlights of the procedure changes include:
Expansion for initial plan determination - Code Sec. 403(b) retirement plan sponsors may submit determination letter applications for all initial individually designed retirement plans based on the sponsor's Employer Identification Numbers (EIN).
Terminations - Code Sec. 403(b) retirement plan sponsors may also request a determination letter upon plan termination or at any time thereafter without regard to their EIN.
Prior determination letter issued to a pre-approved plan treatment - A determination letter issued to an adopter of a pre-approved retirement plan as a result of filing an 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 an Application for Determination for Employee Benefit Plan.
Scope of review - The IRS generally will consider in its review of qualification requirements and Code Sec. 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 preceding the year in which the determination letter application is submitted, subject to any specified modifications on the annual Employee Plans revenue procedure that provides the administrative and procedural rules for submitting determination letter applications.
Additional guidance will be released in the future and will contain additional changes to procedural requirements for plan submissions, such as the phase in of mandatory electronic submission of determination letter requests and modifications to forms.
?Given the advantages of receiving a favorable determination letter from the IRS, plan sponsors of individually designed 403(b) plans may want to consider filing for a determination letter in accordance with the new program.