IRS Rev. Proc. 2023-4 Updates the Determination Letter Program

Practical Law Legal Update w-038-1035 (Approx. 4 pages)

IRS Rev. Proc. 2023-4 Updates the Determination Letter Program

by Practical Law Employee Benefits & Executive Compensation

Changes to Rev. Proc. 2022-4

Rev. Proc. 2023-4 includes substantive changes to Rev. Proc. 2022-4 and provides:

General information about the types of advice provided by the IRS Tax Exempt and Government Entities Division, Employee Plans Rulings and Agreements Office (Employee Plans Rulings and Agreements).
General procedures for letter ruling and determination letter requests.
Specific procedures for determination letter requests.
The user fees for advice requested from Employee Plans Rulings and Agreements.

Requesting Determination Letters

Rev. Proc. 2023-4 modifies the determination letter program to:

Provide the determination letter procedures for 403(b) individually designed plans, beginning June 1, 2023, and the user fees (Sections 6, 8, 9, 10, 11, 19, and 20, and Appendix A).
Provide that Form 5307, Application for Determination for Adopters of Modified Nonstandardized Pre-Approved Plan and Form 5316, Application for Group or Pooled Trust Ruling may be submitted electronically beginning June 1, 2023, and must be submitted electronically beginning July 1, 2023 (Sections 6.02 and 16).
Reflect that the IRS is temporarily not accepting applications for opinion letters on:
- prototype individual retirement accounts (IRAs) (including traditional, Roth, and Savings Incentive Match Plan for Employees IRAs (SIMPLE IRAs));
- simplified employee pensions (SEPs) (including salary reduction SEPs (SARSEPs)); and
- SIMPLE IRA plans.
(Sections 3 and 31 and Appendix A; see Legal Update, IRS Announcement 2022-6 Pauses Opinion Letter Program for Certain IRAs and SEPs.)
Reflect changes to the scope of determination letters, except for ongoing plans. Specifically, Rev. Proc. 2023-4 provides that:
- for changes in qualification requirements or Section 403(b) requirements that have been or will be included on a Required Amendments List, the IRS will consider only those changes that appear on a Required Amendments List issued on or before the last day of the second calendar year before the year in which the determination letter application is submitted;
- for changes in qualification requirements or Section 403(b) requirements that have not been and will not be included on a Required Amendments List, the IRS will consider only those requirements in effect on or before the last day of the second calendar year before the year in which the determination letter application is submitted; and
- for terminating plans, the IRS will consider qualification requirements or Section 403(b) requirements that apply before the termination date, regardless of whether the requirement is included on a Required Amendments List.
(Section 9.02.)
There are no exceptions to the general rules on scope of determination letters for ongoing plans.
Add a new checklist for applications for nonbank trustee approval letters (Appendix G).

Updated User Fees

Regarding user fees, Rev. Proc. 2023-4 revises Appendix A, which provides a schedule of user fees, to update the user fees relating to:

Letter ruling requests.
Opinion letters on pre-approved plans submitted pursuant to Rev. Proc. 2017-41.

Practical Implications

Retirement plan sponsors and practitioners should be aware of the changes to the determination letter procedures and IRS fees instituted by Rev. Proc. 2023-4. Rev. Proc. 2023-4 took effect on January 3, 2023.

IRS Rev. Proc. 2023-4 Updates the Determination Letter Program | Practical Law