The Internal Revenue Service (IRS) has issued Revenue Procedure 2022-40 (Rev. Proc. 2022-40), which updates the IRS's determination letter program. Among other things, Rev. Proc. 2022-40 expands the determination letter program to allow plan sponsors to submit determination letter applications for individually designed Internal Revenue Code Section 403(b) plans.
Determination Letters for Individually Designed 403(b) Plans
Under Rev. Proc. 2022-40, plan sponsors may submit determination letter applications for individually designed Section 403(b) plans. Starting June 1, 2023, determination letter applications may be submitted for:
Initial plan determination.
Determination upon plan termination.
Other circumstances specified by the IRS.
The application date for initial plan determinations, however, will be staggered over a three-year period (June 1, 2023, June 1, 2024, and June 1, 2025) and will be determined by the last digit of the plan sponsor's employer identification number (EIN).
A provision, or absence of a provision, in a new plan that causes the Section 403(b) plan form to not satisfy the Section 403(b) requirements.
An amendment to an existing plan that causes the Section 403(b) plan form to not satisfy the Section 403(b) requirements.
A plan provision that:
causes a Section 403(b) plan form to not satisfy the Section 403(b) requirements due to a change in the requirements; or
is integral to a provision that causes a plan form to not satisfy the Section 403(b) requirements due to a change in the requirements.
The absence of a plan provision that is required by, or integral to, a change in the Section 403(b) requirements.
Remedial Amendment Period
Regarding the remedial amendment period for individually designed qualified and Section 403(b) plans, Rev. Proc. 2022-40:
Incorporates the provisions of Rev. Proc. 2019-39 concerning the start of the remedial amendment period for Section 403(b) plan form defects.
Extends the end of the remedial amendment period for a disqualifying provision concerning a provision, or absence of a provision, in a new qualified plan to the last day of the second calendar year after the calendar year the plan is put into effect.
Extends the end of the remedial amendment period for a disqualifying provision concerning a provision, or absence of a provision, in a new governmental plan to the later of:
the last day of the second calendar year after the calendar year the plan is put into effect; or
90 days after the close of third legislative session of the legislative body that has the authority to amend the plan that begins after the end of the plan's initial plan year.
Plan Sponsor Eligibility
The IRS is updating the determination letter eligibility rules for plan sponsors of individually designed plans. Under Rev. Proc. 2022-40, plan sponsors of individually designed plans may apply for an initial plan determination letter on Form 5300, provided the plan has not already submitted an application on Form 5300 and been issued a determination letter as an individually designed plan. Rev. Proc. 2022-40 also provides examples regarding whether an initial plan determination has already been made.
Scope of IRS Review of Individually Designed Plans
Plan sponsors of 403(b) retirement plans in particular should review the modifications made to the determination letter process in Rev. Proc. 2022-40. As part of the release, the IRS noted that a new Revenue Procedure will be issued in the "near future" containing additional changes for plan submissions, including mandatory e-submission of determination letter requests.