IRS Expands 401(k) Tax-Favored Approval Process to 403(b)s

The Treasury Department and Internal Revenue Service said Monday that 403(b) retirement plans — used by certain public schools, churches and charities — can apply for the same tax-favored treatment as qualified retirement plans like 401(k)s and use the same regulatory process as these plans starting in June 2023.

In Revenue Procedure 2022-40, the IRS details the expansion of the determination letter program, which is the process through which different types of plans can get IRS approval for tax-favored treatment. The IRS document also spells out other changes affecting individually designed retirement plans. 

The IRS states that Revenue Procedure 2022-40 contains two key additions for 403(b) retirement plans.

First, it expands  the process for initial plan determination: “Beginning June 1, 2023, 403(b) retirement plan sponsors may submit determination letter applications for all initial individually designed retirement plans based on the sponsor’s Employer Identification Numbers.” (The IRS says more details on the expansion can be found in Section 12 of Revenue Procedure 2022-40.)