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IRS Opens Determination Letter Program to 403(b) Plans IRS Opens Determination Letter Program to 403(b) Plans

IRS Opens Determination Letter Program to 403(b) Plans

The Internal Revenue Service (IRS) recently announced the expansion of its determination letter program to individually designed 403(b) plans beginning June 1, 2023. This presents a significant and welcome opportunity for sponsors of 403(b) plans—such as universities, schools, tax-exempt organizations, and churches—to secure long-awaited assurance from the IRS on plan document compliance. 

Revenue Procedure 2022-40, issued on November 7, 2022, permits plan sponsors to submit determination letter applications for individually designed 403(b) plans for:
  • initial plan determination, 
  • plan terminations, and 
  • other circumstances to be announced,
on substantially the same basis as already available for individually designed qualified 401(a) plans.


Historically, plan sponsors of individually designed qualified 401(a) plans could apply for an IRS determination letter under a five-year remedial amendment cycle. While plan sponsors were not required to apply for a determination letter, most did so since a letter provides assurance that the plan document in written form complies with the Internal Revenue Code. Plans with determination letters could also more easily correct errors under the IRS's correction program, the Employee Plans Compliance Resolution System (EPCRS). 

Written plan documents for 403(b) plans were not required by the IRS until January 1, 2009. At that time, the IRS announced that it intended to expand the determination letter program to cover individually designed 403(b) plans. Due to resource challenges, however, the IRS instead issued Revenue Procedure 2016-37, which not only failed to expand the determination program to 403(b) plans, but significantly restricted the availability of determination letters for 401(a) plans. Effective January 1, 2017, plan sponsors of individually designed qualified 401(a) plans can submit a determination letter application only for initial plan qualification, qualification upon plan termination, and in certain other circumstances to be subsequently announced by the IRS. 

To help plan sponsors maintain document compliance, the IRS introduced its annual Cumulative Lists of Changes in Plan Qualification Requirements, which are published each year to identify all changes in qualification requirements that are required to be taken into account in the written plan document. Additionally, the IRS expanded its pre-approved plan document program that applied to 401(a) plans to also cover 403(b) plans. A pre-approved plan document has received written assurance from the IRS that it satisfies Internal Revenue Code requirements and is sponsored by a third party (such as a financial institution) that is responsible for maintaining the plan document for legally required updates. However, unlike 401(a) plan sponsors, 403(b) plan sponsors did not have an avenue to seek approval of an individually designed 403(b) plan.

New Guidance

In a welcome development, Revenue Procedure 2022-40 now extends the IRS determination letter program to 403(b) plans. Beginning June 1, 2023, 403(b) plan sponsors may submit determination letter applications for: 
  • initial plan determination,
  • determination upon plan termination, and
  • other circumstances to be specified by the IRS.
There is a staggered start date for initial 403(b) plans determinations based on the plan sponsor's EIN. Applications for initial plan determinations may be submitted by filing a Form 5300 as follows:
  • Plan sponsors whose EIN ends with 1, 2, or 3 may file on and after June 1, 2023;
  • Plan sponsors whose EIN ends with 4, 5, 6, or 7 may file on and after June 1, 2024; and
  • Plan sponsors whose EIN ends with 8, 9, or 0 may file on and after June 1, 2025.
All plan sponsors may submit Form 5310 applications for 403(b) plan terminations beginning June 1, 2023, without regarding to their EIN.

A plan sponsor of an individually designed 403(b) plan can request a determination letter regardless of how long the plan has been in existence if it has not previously filed a Form 5500 and received a determination letter. This is true even for plan sponsors who restated their 403(b) plans on a pre-approved plan document, filed a Form 5307, and received a determination letter. Importantly, since plan sponsors have not previously been able to secure an IRS determination letter for their individually designed 403(b) plans, this change means that almost all sponsors of individually designed 403(b) plans will now have an opportunity to secure an initial IRS determination letter for their plan. 

Determination letters will not be issued for the following 403(b) individually designed plans: (i) a 403(b) plan that is a grandfathered defined benefit plan sponsored by a church or (ii) a state sponsored 403(b) plan that is grandfathered under Revenue Ruling 82-102. Moreover, the IRS will not issue a determination letter related to a 403(b) plan's coverage of unrelated employers.

Action Items

Since 2017, many plan sponsors have restated their 403(b) plans onto an IRS pre-approved plan document. Pre-approved plans can be easier to maintain and cheaper than individually designed plans. 

However, other plan sponsors have maintained their individually designed plans for a number of reasons. Plans with more complicated designs, such as many university plans, state optional retirement plans, hospital plans, and church plans, are difficult to fit onto pre-approved plan documents due to their “check the box” format and limited election options. Plan sponsors that attempt to fit their plans onto pre-approved plan documents by adopting “off-template” amendments may lose their IRS pre-approved status. Plan sponsors with multiple approved service providers may be concerned about the appearance of endorsing a particular provider by using its pre-approved plan document. These plan sponsors will want to consider requesting a determination letter under the IRS expanded program in order to assure the compliance of their individually designed 403(b) plan documents in written form. 

Additionally, plan sponsors that intend to terminate (or have recently terminated) their 403(b) plans should consider whether to apply for a determination letter. Terminating plans are required to be updated for all applicable laws prior to termination, and seeking a determination letter ensures that the IRS will not later challenge a termination.

Comments Requested

Revenue Procedure 2022-40 is effective immediately. The IRS has requested comments on specific types of plans for which it should consider accepting determination letter applications in circumstances other than provided in Revenue 2022-40. Comments should be submitted by February 28, 2023.

For additional information or to discuss whether requesting a determination letter makes sense for your individually designed 403(b) plan, please contact Tara Sciscoe, Chris Sears, Rob Gauss, Shalina Schaefer, Raven Merlau, Audra Ferguson-Allen, Austin Anderson, or the Ice Miller Workplace Solutions attorney with whom you regularly work.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.
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