The Internal Revenue Service (IRS) expanded its individually designed determination letter program to include 403(b) retirement plans in November 2022, before which time 403(b) plan sponsors did not have the ability to file for a determination letter, and thus could not receive assurance from the IRS that the plan’s written terms complied with Internal Revenue Code (Code) Section 403(b).
Under the expanded program, 403(b) plan sponsors can file for a determination letter on initial qualification and plan termination. Since 403(b) plans were previously ineligible to file for determination letters, all existing 403(b) plans will now be eligible to file for a determination letter on initial qualification. To accommodate the expanded determination letter program and unique characteristics of 403(b) plans, the IRS recently issued updated determination letter application Forms 5300 and 5310.
Changes to Determination Letter Application Forms 5300 and 5310
Form 5300 is used to request a determination letter for initial qualification, while Form 5310 is used to request a determination letter upon plan termination. Because 403(b) plans were not previously able to file for a determination letter, the forms included questions that were not applicable to 403(b) plans and also did not address certain issues that might be relevant to 403(b) plans. For this reason, the IRS updated the forms to include two separate lists of questions: a list of questions applicable only to tax-qualified plans that are subject to the requirements of Code Section 401(a) and a list of questions applicable only to 403(b) plans.
The separate lists focus on confirming the defining features and characteristics of the 401(a) or 403(b) plan that is being submitted to the IRS for a determination letter. For example, most of the questions under the 401(a) plan portion focus on the type of plan that is submitted by the sponsor, including a list of plan types/features that cannot coexist with 403(b) plans, such as whether the plan is a multiemployer plan. The 403(b) plan list asks for additional details regarding the 403(b) plan sponsor (e.g., that the sponsor is one of the entities eligible to sponsor a 403(b) plan) and how contributions under the plan are held (e.g., annuity contracts or custodial accounts).
As a reminder, Forms 5300 and 5310 are fully electronic, and all determination letter filings (including payment of the filing fee) must be made online at pay.gov.
How and When 403(b) Plan Sponsors Can Apply for Initial Qualification
The first group of 403(b) plans may now file for a determination letter for initial qualification on the revised forms. The dates on which 403(b) plans become eligible to apply for initial qualification are staggered based on plan sponsors’ employee identification numbers (EINs), as listed below:
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If the EIN of the plan sponsor ends in: |
A determination letter application may be submitted beginning on: |
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1, 2, or 3 |
June 1, 2023 |
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4, 5, 6, or 7 |
June 1, 2024 |
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8, 9, or 0 |
June 1, 2025 |
The IRS will review the plan document to confirm that it incorporates the Code Section 403(b) requirements that are in effect at the time the submission is made, and any others included on the Required Amendments List (the list issued by the IRS to identify updated requirements that plans must be amended to incorporate), on or before the last day of the second calendar year preceding the year in which the determination letter application is submitted.
For example, plan sponsors whose EINs end in 1, 2, or 3 are already eligible to file their plans for initial qualification, and, if they file during 2023, the determination letter would cover the 2021 Required Amendments List.
Next Steps
Any 403(b) plan sponsors considering a determination letter filing should confirm the earliest date an application can be made. In preparing to file for a determination letter, 403(b) plan sponsors that have not already done so should work with legal counsel to review and update their 403(b) plans to comply with applicable law. 403(b) plans that have been in existence for many years may include outdated provisions that no longer apply and/or may need to be updated to incorporate new law changes or updates. If you have any questions or would like more information on the issues discussed in this blog post, please contact a Morgan Lewis lawyer.
Summer associate Andrew Barber contributed to this post.