A Boon for the 403b: IRS Expands Tax-Favored Approval Process

IRS 403b

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Starting in June 2023, the Internal Revenue Service will allow 403b retirement plans to use the same individually designed retirement plan determination letter program currently used by 401ks.

The Treasury Department and IRS made the announcement today about the expansion of one of their programs for approving retirement plans, allowing 403b plans—which are used by certain public schools, churches and charities—to apply for the same tax-favored treatment as qualified retirement plans.

Revenue Procedure 2022-40 details this expansion and includes other changes affecting individually designed retirement plans. These rules will apply to submissions of all individually designed retirement plans.

Revenue Procedure 2022-40 contains the following notable additions for 403b retirement plans, as outlined by the announcement:

Notable changes to procedures for submitting and processing individually designed retirement plans include:

The IRS also said that Revenue Procedure 2023-4, currently in development, will be released in the near future and will contain additional changes to procedural requirements for plan submissions, such as phasing-in mandatory e-submission of determination letter requests. Forms 5300 and 5310 will also be updated to reflect these changes.

SEE ALSO:

• 2023 401k Contribution Limits Released: Big COLA Increase for Savers

• Nonprofits Enhance 403(b) Contributions, Financial Wellness Post-COVID

• IRS Extends SECURE, CARES Act Amendment Deadlines

• IRS Announces ‘Pre-Audit’ Retirement Plan Pilot Program

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