Employee Plans news

Required minimum distributions: beneficiaries

Beneficiaries of retirement plan and IRA accounts are subject to required minimum distribution (RMD) rules. The SECURE Act changed how and when beneficiaries who are individuals must take distributions for account owner deaths after 2019. There were no changes to the RMD requirements for beneficiaries where the account owner died prior to 2020 or to beneficiaries that are not individuals.

Distributions to beneficiaries from qualified retirement plans

If the distribution is from a qualified retirement plan, such as a 401(k) or profit-sharing plan, the plan document establishes the distribution options available to satisfy the RMD rules. A spousal beneficiary will generally have more options available to them in the plan than a non-spouse beneficiary. Beneficiaries should contact the plan administrator to learn about their distribution options in a qualified plan.

Distributions to beneficiaries from inherited IRAs

Spousal beneficiaries – Death of the account owner after 2019

If death occurred prior to the required beginning date, spousal beneficiaries have two options:

• Roll over the account into their own IRA
  • Treat as their own IRA
  • Take distributions based on their own age
  • Distributions from their own IRA are subject to the 10% additional tax on early distributions
• Keep as an inherited account
  • Must take distributions based on their own life expectancy, or
  • Follow the 10-year rule
  • Not subject to the 10% additional tax on early distributions

If death occurred after the required beginning date, spousal beneficiaries have two options:

• Roll over the account into their own IRA (only if spouse is sole beneficiary)
  • Treat as their own IRA
  • Take distributions based on their own age
  • Subject to the 10% additional tax on early distributions before age 59½
• Keep as an inherited account
  • Must take distributions based on their own life expectancy or the decedent’s life expectancy, whichever is longer

Non-spouse beneficiary – Death of the account owner after 2019

Options for a beneficiary who is not the spouse of the deceased account owner depend on whether they’re an “eligible designated beneficiary” or a designated beneficiary. An eligible designated beneficiary is

• Surviving spouse
• Minor child of the deceased account holder (must follow 10-year rule after reaching age 21)
• Disabled or chronically ill individual
• Individual who is not more than 10 years younger than the IRA owner or plan participant

An eligible designated beneficiary may

• Take distributions over the longer of their own life expectancy and the account owner’s remaining life expectancy, or
• Follow the 10-year rule (if the original account owner died before their required beginning date)

Designated beneficiary (not an eligible designated beneficiary)

• Follow the 10-year rule

Non-designated beneficiary (for example a charity or estate)

• Follow the 5-year rule if the owner died before distributions were required to begin
• Take distributions over the life expectancy of the original owner if they died after distributions were required to begin

Resources

The IRS released Notice 2023-54 PDF that provides that certain non-spouse beneficiaries subject to the 10-year distribution rule will not fail the RMD requirements because they didn’t make distributions in 2023. Notice 2022-53 PDF stated the IRS will not treat a beneficiary of an inherited account in a plan or IRA who was subject to the 10-year rule and who failed to take an RMD for 2021 and 2022 as having failed to take the correct RMD.

For more detailed information on the changes made to beneficiary distributions by the SECURE Act and how these changes interact with the CARES Act, please visit IRS.gov/rmd and Publication 590-B, Distribution from Individual Retirement Arrangements (IRAs).

Required Minimum Distributions

Required Minimum Distributions (RMDs) are minimum amounts you must withdraw from your IRA or retirement plan account when you reach age 72. Beginning in 2023, the SECURE 2.0 Act changed the age RMDs must begin to age 73 for taxpayers that are born after 1950.

Roth IRAs are not subject to RMDs until after the death of the original account owner. Designated Roth accounts in a 401(k) or 403(b) plan are subject to the RMD rules for 2023. However, for 2024 and later years, RMDs are no longer required from designated Roth accounts.

RMDs from an IRA

You can meet your RMD requirement by taking a withdrawal from one or more of your traditional IRAs, or SEP, SIMPLE and SARSEP IRAs. It’s not necessary to take a withdrawal from each of your IRAs, but your total withdrawals must be at least equal to the total RMD due from all IRAs.

Reach age 72 in 2022: The first RMD from your IRAs was due by April 1, 2023, based on the December 31, 2021, account balances. Your second RMD is due by December 31, 2023, based on the December 31, 2022, account balances.

Reach age 72 in 2023: Your first RMD is for 2024, the year you reach age 73, and is due by April 1, 2025.

Reach age 73 in 2023: You were age 72 in 2022 and your first RMD for 2022 was due by April 1, 2023. Your second RMD is due by December 31, 2023, based on your December 31, 2022, account balances.

RMDs from a retirement plan

To satisfy the RMD requirements in a retirement plan, you must take RMDs separately from each of your retirement plans. If you reached age 72 in 2022, your first RMD for 2022 is due by April 1, 2023, based on your December 31, 2021, account balance. Your 2023 RMD is due by December 31, 2023, based on your December 31, 2022, account balance.

If you’re still employed by the plan sponsor, and not a 5% owner, your plan may allow you to delay taking RMDs from that workplace retirement plan until you retire. IRS rules always require you to take RMDs beginning at age 72 from traditional IRAs, SEP, SIMPLE and SARSEP IRA plans, even if you’re still employed.

For more information, see the recent IRS news release reminding those age 73 and older to make required withdrawals from IRAs and retirement plans by December 31, 2023.

Taking distributions from your retirement plan or IRA before age 59 ½

Saving for retirement occurs over a period of perhaps 40 or more years. And over those 40-odd years, you may run into life-situations and need to withdraw from your retirement savings early. If you do, withdrawals are normally subject to ordinary income tax, and if taken prior to reaching age 59 ½ may be subject to an additional 10% tax. Here are a few things to consider before withdrawing from your retirement plan or IRA.

Additional 10% tax on early distributions

If you take distributions from retirement plans and IRAs before the age of 59 ½, you may owe an additional 10% tax on the taxable amount of the early distributions, unless you meet an exception. There are more than 20 exceptions, including several new exceptions added by the SECURE Act and SECURE 2.0 Act.

IRAs and IRA-based plans

Individuals can take distributions from their IRA, SEP-IRA or SIMPLE-IRA at any time. Taxpayers don’t need to show a hardship to take a distribution – they can just request a withdrawal from the financial institution that holds the account.

Distributions from a traditional IRA are subject to ordinary income tax. Withdrawals before age 59 ½ may be subject to the 10% early distribution tax unless an exception applies. Qualified distributions from a Roth IRA are not subject to income tax (generally, after you’ve had the Roth account for five years and reach 59 ½).

Workplace retirement plans: 401(k), 403(b) and 457(b)

Taxpayers can take distributions from these plans only when certain life events occur, for example retiring or becoming disabled. The plan's summary description should clearly state when you can take a distribution from the plan while still working for that employer. Many plans allow participants to take a distribution on account of a hardship or take a loan from the plan for any reason.

Hardship distributions

You may be able to take a distribution from a governmental 457(b) plan because of an unforeseen emergency, or from a 401(k) or 403(b) plan because of an immediate and heavy financial need. Distributions due to a hardship can only cover the amount of your emergency, or that of your spouse or dependent, and is subject to withholding.

You should report hardship distributions as gross income when you file your tax return unless the distributions are designated Roth contributions. Hardship distributions can’t be repaid to the plan or rolled over to another plan.

Any distribution before you reach age 59 ½ may result in a 10% additional tax on the amount withdrawn unless an exception applies. Distributions from a 457(b) plan are not subject to the 10% early distribution tax.

Loans

Some plans may allow you to take loans if you meet certain plan limits on loan amounts and other requirements. You might be able to borrow up to the lesser of $50,000 or 50% of your account balance and must repay the loan over no more than 5 years. If the loan meets the plan rules and is repaid on time, these loans are not subject to tax.

Reporting distributions from retirement plans

People of all ages need to report distributions, including unpaid loans from retirement plans, as gross income on their tax return. Qualified distributions from Roth IRAs and designated Roth accounts are excluded from gross income.

To report distributions to the IRS:

1. Include distributions on your Form 1040, Individual Income Tax Return
2. Report early distributions on Form 5329, Additional Taxes on Qualified Plans, Including IRAs, and Other Tax-Favored Accounts
3. Determine if an early distribution meets one of the exceptions to the additional 10% tax on early distributions.
4. Report qualified disaster distributions and repayments on Form 8915-F.

Exceptions to the additional 10% tax on early distributions

Distributions after age 59 ½, on account of death or disability, and certain distributions to qualified military reservists called to active duty are common exceptions to the 10% additional tax on early distributions from retirement plans and IRAs.

Some exceptions only apply to early distributions from IRAs. These include distributions for first-time homebuyers and for qualified higher education expenses.

Other exceptions only apply to early distributions from retirement plans. These include distributions after separation from service after reaching age 55, and distributions under a Qualified Domestic Relations Order.

Qualified charitable distributions

Individuals age 70 ½ or older may be able to exclude a qualified charitable distribution (QCD) of up to $100,000 from their income each year. A QCD is a taxable distribution paid directly from an IRA (other than an ongoing SEP or SIMPLE IRA) to a qualified charity. It cannot be paid to you as the IRA owner.

You must be at least age 70 ½ when the QCD distribution to the charity is made. The SECURE 2.0 Act of 2022 did not change the 70 ½ age to be eligible to make a QCD.

A QCD may also count toward your required minimum distribution for the year.

A QCD does not affect your income and is tax-free if paid directly from the IRA to an eligible charitable organization, and is available regardless of whether you itemize deductions on Schedule A. If you took a distribution from your IRA and then made a charitable donation, the distribution would be taxable as ordinary income and the donation would only be deductible as an itemized deduction on Schedule A. Itemized deductions for most taxpayers don’t exceed the available standard deduction. And the increased income could affect eligibility for certain available tax credits.

The financial institution reports the QCD to you on Form 1099-R. You report the QCD on Line 4a of the Form 1040 along with any other IRA distributions. Show the amount of the QCD as zero taxable on Line 4b and write “QCD” next to the Line 4b entry. Review Publication 590-B, Distributions from Individual Retirement Arrangements for more information.

IRS meeting for pre-approved plan providers and mass submitters

The IRS is hosting a virtual meeting with pre-approved plan providers and mass submitters to discuss technical and procedural requirements for the upcoming 4th cycle 401(a) defined contribution pre-approved plan submission period.

When

Wednesday, January 17, 2024

12 p.m. – 1:30 p.m. Eastern Time

Who should attend

This meeting is intended for those providers and mass submitters who draft pre-approved plans and plan to apply for a 4th cycle opinion letter under Revenue Procedure 2023-37. We anticipate this meeting will be mutually beneficial for the providers, mass submitters, and the IRS.

How to register

Please send an email to cameron.r.kalchert@irs.gov by January 8, 2024, if you’re interested in attending and we’ll provide you with instructions for joining the meeting.

IRS updates and combines procedures for pre-approved plans

The IRS released Revenue Procedure 2023-37 PDF, which consolidates prior procedures into this revenue procedure to conform, clarify and update the rules. Rev. Proc. 2023-37 describes the cycle system, plan provider application procedures, and the determination application rules for adopting employers.

Check the status of your VCP submission

You can find out if your Voluntary Correction Program submission has been assigned to a specialist at IRS.gov/vcpstatus. Just compare the date of your confirmation email to the date of the most recent VCP submissions that have been assigned to a specialist.

Revised VCP model compliance statement and schedules

The IRS updated several fill-in VCP forms to revise outdated information, provide clarity, and make it easier to present some late amender failures that impact 401(a) and 403(b) retirement plans.

Plan sponsors can use the model compliance statement and schedules to make an IRS Voluntary Correction Program (VCP) submission. The model schedules (Forms 14568- A to 14568-I) contain standardized methods plan sponsors can use to correct common mistakes using VCP.

We’ve made changes to the following fill-in forms:

Form 14568, Model VCP Compliance Statement PDF

• Updated enforcement section language

Form 14568-A, Model VCP Compliance Statement - Schedule 1: Plan Document Failures for 403(b) Plans PDF

• Redesigned form applies only to 403(b) late amender failures
• Provides a framework to present late amender failures that involve IRC 403 plans
• Standardized descriptions for some very common 403(b) plan document failures

Form 14568-B, Model VCP Compliance Statement - Schedule 2: Nonamender Failures for 401(a) Plans PDF

• Redesigned form applies only to 401(a) late amender failures
• Failures grouped by pre-approved plans vs individually designed plans
• Failure descriptions for pre-approved plans include the latest failures
• Provides a framework to present failures involving individually designed plans not timely to comply with the Required Amendments List, or the Cumulative List (prior to 2017)
• Legit late interim amendment failures affecting a pre-approved plan would be presented as an “Other” failure in Section I C

Form 14568-C, Model VCP Compliance Statement - Schedule 3: SEPs and SARSEPs PDF

• Updated direct link to the DOL VFCP calculator
• Standardized narrative involving small excess amounts increased to $250

Form 14568-D, Model VCP Compliance Statement - Schedule 4: SIMPLE IRAs PDF

• Updated direct link to the DOL’s VFCP calculator
• Standardized narrative involving small excess amounts increased to $250

No changes have been made to the other forms in the Form 14568 series (Form 14568-E through Form 14568-I).

Interim guidance on EPCRS: Notice 2023-43

The IRS released guidance in the form of Q&As on changes made by the SECURE 2.0 Act to the Employee Plans Compliance Resolution System of voluntary correction programs for retirement plans. Notice 2023-43 PDF provides interim guidance for taxpayers in advance of an update to EPCRS as outlined in Revenue Procedure 2021-30.

For more information on the correction programs available to correct mistakes in your retirement plan, go to IRS.gov/fixmyplan.

Plan sponsors that filed timely and complete Forms 8955-SSA do not need to respond to penalty notices dated before September 1, 2023

As a result of a programming issue in the IRS system that receives Forms 8955-SSA, the IRS sent out CP 283-C penalty notices to plan sponsors who timely filed complete 2022 Forms 8955-SSA. The notices indicate a late or incomplete filing of Form 8955-SSA.

Plan sponsors that timely filed a complete return do not need to respond to penalty notices dated prior to September 1, 2023. The IRS has resolved the programming issue and is updating its records to reflect the timely and complete filings. If you have any questions, contact the IRS at 877-829-5500.

The IRS also reminds plan sponsors that Form 8955-SSA must be filed with the IRS, not with DOL through the EFAST2 System. If a Form 8955-SSA is filed in EFAST2, it will not be treated as timely filed by the IRS. Go to IRS.gov/5500corner for more information on filing Form 5500 series returns and Form 8955-SSA.

403(b) plan determination program opens June 1

Beginning June 1, 2023, the IRS is expanding the determination letter program to include certain 403(b) plans. Plan sponsors that maintain an individually designed 403(b) plan will be permitted to submit a determination letter application for an initial plan determination based on the EIN of the plan sponsor:

• EIN ends in 1, 2 or 3 - submit beginning June 1, 2023.
• EIN ends in 4, 5, 6 or 7 - submit beginning June 1, 2024.
• EIN ends in 8, 9 or 0 - submit beginning June 1, 2025.

Plan sponsors may also submit an application for terminating 403(b) plans beginning June 1, 2023. The IRS may announce other circumstances that would allow 403(b) sponsors to a submit determination application in the future. See Revenue Procedure 2022-40 for more information.

Form 5300, Application for Determination for Employee Benefit Plan, and Form 5310, Application for Determination Upon Termination, will be updated in Pay.gov to reflect the addition of 403(b) plans.

The user fees for 403(b) determination letter applications are:

• Form 5300 with 100 or more participants: $2,700.
• Form 5300 with less than 100 participants: $300.
• Form 5310: $3,500.

Electronic filing regulations for Tax Exempt & Government Entities

Recently, the Department of the Treasury published final regulations, Electronic-Filing Requirements for Specified Returns and Other Documents, implementing the reduced electronic threshold under Section 2301 of the Taxpayer First Act of 2019 (TFA). Under the regulations found in T.D. 9972 PDF, taxpayers who are required to file at least 10 returns of any type during the calendar year must file electronically. Generally, the final regulation applies after 2023. See the regulations for detailed dates of applicability to specific returns.

Among others, the regulations apply to the following forms:

Exempt organizations

• 5227, Split-Interest Trust Information Return
• 4720, Return of Certain Excise Taxes on Charities and Other Persons Under Chapters 41 and 42 of the IRC (if filed by other than a private foundation)
• 1120-POL, U.S. Income Tax Return for Certain Political Organizations

Employee plans

• 8955-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits
• 5500-EZ, Annual Return of A One-Participant (Owners/Partners and Their Spouses) Retirement Plan or A Foreign Plan
• 5330, Return of Excise Taxes Related to Employee Benefit Plans

Government entities

• 8596, Information Return for Federal Contracts
• 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds

Under Internal Revenue Code Section 6011(e)(2)(B), the regulations take into account the ability of the taxpayer to e-file at reasonable cost. On a year-by-year and form-by-form basis, the IRS may waive the requirement to file electronically in cases of undue hardship. In certain circumstances, a filer may be administratively exempt from the requirement to file electronically. The instructions to each form will set forth details on the waiver. In general, the filer should maintain documentation supporting the undue hardship or other applicable reason for not filing electronically.

Additionally, Section 3101 of the TFA sets forth “mandatory e-filing by exempt organizations,” which is already in effect. This applies to the following forms:

• 4720 (if filed by a private foundation)
• 990, Return of Organization Exempt from Income Tax
• 990-EZ, Short Form Return of Organization Exempt From Income Tax
• 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation
• 990-T, Exempt Organization Business Income Tax Return

DeterminationlLetters: Form 5307 and Form 5316 electronic submission

On June 1, 2023, the IRS will begin accepting electronic submissions of Form 5307 and Form 5316 applications for determination letters at Pay.gov. The IRS will continue to accept paper applications through June 30, 2023. Beginning July 1, 2023, all Form 5307 and 5316 applications must be filed electronically on Pay.gov.

The IRS is currently revising Form 5307, Application for Determination for Adopters of Modified Nonstandardized Pre-Approved Plans, and Form 5316, Application for Group or Pooled Trust Ruling, and instructions, to be submitted electronically.

You'll receive a confirmation e-mail (acknowledgement) with your Tracking ID after you submit your Form 5307 or Form 5316 application through Pay.gov. The IRS does not mail a separate acknowledgement letter for Pay.gov submissions.

Pay.gov will accept a single PDF file (not exceeding 15MB) in addition to your Form 5307 or 5316. Fax documents in excess of the 15MB limit to 844-255-4818. Include a fax coversheet with the employer’s name, EIN, plan name and Pay.gov Tracking ID. Faxes that exceed 150MB cannot be delivered. Contact IRS Customer Accounts Services at 877-829-5500 for additional help.

If the plan does not qualify for the zero-dollar user fee in Notice 2017-1, you must pay user fees through Pay.gov using a bank account (ACH), or a credit or debit card.

See Revenue Procedure 2023-4, Part II for the latest procedures and Appendix A for the latest user fees for determination letter requests.

Small business week: Choosing a retirement plan

If you’re a small business owner, you may be so busy trying to grow your business that you haven’t thought about starting a retirement plan. Many states have passed legislation requiring small businesses to cover their employers in a retirement plan.

Saving for retirement is a lifelong venture. It’s never too late to start saving, but the earlier you start, the more you can take advantage of the magic of compounding interest PDF.

Check out Pub 3998, Choosing a Retirement Solution for Your Small Business PDF (also in Spanish PDF) for information about the types of retirement plans available, including an easy-to-follow plan comparison chart. The IRS also has a series of short videos to help small business owners pick the best plan for their situation:

What you should know about retirement plans - This video series discusses the different qualified retirement plans adopted by many small employers

• Profit-sharing plans
• 401(k) plans
• Defined benefit plans

What you should know about IRA-based plans - This video series discusses the different types of IRA-based plans adopted by many small employers.

• SEP IRA plans
• SIMPLE IRA plans
• SARSEP IRA plans
• Payroll deduction IRAs

We’re hiring! IRS announces entry-level internal revenue agent positions

Build a career with purpose. The IRS announced openings across the country for GS 5-12 Internal Revenue Agent positions for candidates with the required accounting education.

We offer competitive pay, generous health care and retirement plans, alternative work schedules, work/life balance and numerous other benefits. You can learn more about these positions and apply today at usajobs.gov. Please share this message with others who may be interested in these positions.

IRS TE/GE is hiring tax law specialists

The IRS Tax Exempt & Government Entities Employee Plan division is looking for experienced pension plan practitioners to fill GS-987-13 tax law specialist positions in locations throughout the country.

As a tax law specialist in employee plans, you’ll work with retirement plan sponsors, CPAs, attorneys, and actuaries to discuss pension plan provisions, deficiencies, and applicable correction methods. you’ll also make determinations on plan qualification and examine plans of all sizes to ensure compliance with the internal revenue code.

The IRS offers competitive pay and generous health care and retirement plans. You’ll find a wide variety of career paths, a dynamic work environment, and the ability to balance your work and life with our 40-hour work week, alternative work schedules, and paid vacation, sick and family leave.

To join our diverse workforce, apply online today at usajobs.gov. Please share this message with others who may be interested in one of these positions.

Defined benefit plan sponsors: Plan restatement period

Plan sponsors of defined benefit plans that use an IRS pre-approved document have until March 31, 2025, to restate their plans with a 3rd cycle document. During the period April 1, 2023, through March 31, 2025, the IRS will accept applications for an individual determination letter from eligible employers that adopted a 3rd cycle pre-approved defined benefit plan.

Pre-approved plan providers: Submission period for 4th cycle Defined Contribution (DC) Opinion Letters

The IRS asks pre-approved plan providers and mass submitters to wait to apply for a 4th remedial amendment cycle (RAC) DC Opinion Letter until the IRS announces the opening of the one-year on-cycle submission window.

The 3rd pre-approved DC RAC ended on January 31, 2023, which means that the 4th RAC began on February 1, 2023; however, the submission window has not yet opened. We expect to issue an announcement later this year that opens the on-cycle submission window from February 1, 2024, through January 31, 2025.

Revenue Procedure 2016-37, section 16.03 provides that the IRS may revise a particular RAC by announcing the revision in future guidance. This flexibility is beneficial to both the IRS and plan providers because it ensures that the proper time and resources are available during each RAC.

Pre-approved plan providers: Submission period for Cycle 2 403(b) Plan Opinion Letters

The submission period for 403(b) pre-approved plan providers to submit applications for a Cycle 2 Opinion Letter ends on May 1, 2023. See how to apply for the required items and application steps for your submission.

Operational compliance list

The IRS updated the operational compliance list to reflect recent guidance and legislation. Plan sponsors and practitioners can use this list to help identify changes in plan qualification requirements that may affect their plan.

Compliance programs and priorities

Tax-Exempt and Government Entities issued their 2023 Program Letter that outlines the year’s compliance programs and priorities. You can also view compliance program and priorities for the latest initiatives and the compliance approach used. These initiatives may involve an examination, a compliance check, or an educational contact.

We’re hiring! IRS announces entry-level internal revenue agent positions

Build a career with purpose. The IRS announced openings across the country for GS 5-12 internal revenue agent positions for candidates with the required accounting education.

We offer competitive pay, generous health care and retirement plans, alternative work schedules, work/life balance and numerous other benefits. You can learn more about these positions and apply today at usajobs.gov. Please share this message with others who may be interested in these positions.

Make IRA contributions by April 18

The 2022 tax deadline is April 18, 2023. Individuals have an extra three days to file their Form 1040 or request an extension this year. This also means you have until April 18 to contribute up to $6,000 (plus $1,000 if age 50 or over) to your traditional or Roth IRA for 2022. An extension to file your Form 1040 does not extend the deadline to make contributions to your IRA.

Low-to moderate-income taxpayers may be eligible to claim a Saver’s Credit of up to 50% for contributions they make to IRAs and certain retirement plans. Your maximum credit is $1,000 ($2,000 if married filing jointly), but not more than your income tax liability.

Remove excess salary deferrals for 2022 by April 15

The total of all salary deferrals a participant makes to various retirement plans – including 401(k), 403(b), SARSEP and SIMPLE IRA plans – is limited to $20,500 (plus an additional $6,500 if age 50 or over) for 2022.

If your individual salary deferrals exceed the limit for 2022, you must take a corrective distribution of the excess deferral amount, plus earnings, by April 15, 2023.

Excess salary deferrals withdrawn by April 15:

• Excess is taxed in the calendar year deferred
• Earnings are taxed in the year distributed
• Not subject to 10% early distribution tax, 20% withholding, or spousal consent

Excess salary deferrals not withdrawn by April 15:

• Excess deferral is taxed in the calendar year deferred and the year distributed
• Earnings are taxed in the year distributed
• May be subject to 10% early distribution tax, 20% withholding, and spousal consent

An employer may correct a retirement plan with excess salary deferrals not timely removed using the Self-Correction or Voluntary Correction Programs.

Individuals who made salary deferral contributions to two or more retirement plans of different employers in 2022 may be most at risk for exceeding the deferral limit. Employers are required to limit the salary deferrals for participants in plans of the same employer; however, individuals in multiple plans need to track the total of all their deferrals to avoid exceeding the deferral limit. The Interactive Tax Assistant can help you determine how to correct excess salary deferrals.

TE/GE actuary job opportunities

The IRS Tax Exempt and Government Entities Division has several permanent Actuary GS 14 positions available across the country. The application deadline is January 4, 2024; however, positions will be filled throughout the months preceding the deadline.

Actuaries in TE/GE are responsible for private letter ruling requests, assisting with guidance projects, and working closely with revenue agents on pension plan examinations to provide technical expertise and assistance.

The basic educational requirements include a bachelor’s degree with courses in actuarial science, mathematics, relevant statistics, business, finance, economics, insurance, or computer science totaling at least 24 semester hours. You must have at least 12 semester hours of mathematics that include differential and integral calculus, and one or more mathematic courses for which these calculus courses were prerequisites.

You must include a college transcript with your application to be considered for one of these openings, no matter how long you’ve been working.

For more information, go to usajobs.gov. Do a keyword search for Internal Revenue Service and then filter the results for Series 1510. Review OPM’s Qualification Standards at Actuarial Science Series 1510 (opm.gov).

If you want to learn more about careers at the IRS, including pay, benefits, and alternate work schedules, visit Jobs.irs.gov.

Required Minimum Distributions

Required Minimum Distributions (RMDs) are minimum amounts you must withdraw from your IRA or retirement plan account when you reach age 72. Beginning in 2023, the SECURE 2.0 Act changes the age RMDs must begin to age 73 for taxpayers that reach age 72 after December 31, 2022.

Roth IRAs are not subject to RMDs until after the death of the original account owner. Designated Roth accounts in a 401(k) or 403(b) plan are subject to the RMD rules for 2022 and 2023. However, for 2024 and later years, RMDs are no longer required from designated Roth accounts.

RMDs from an IRA

You can meet your RMD requirement by taking a withdrawal from one or more of your traditional IRAs, or SEP, SIMPLE and SARSEP IRAs. It’s not necessary to take a withdrawal from each of your IRAs, but your total withdrawals must be at least equal to the total RMD due from all IRAs in the aggregate.

Reach age 72 in 2022: The first RMD from your IRAs is due by April 1, 2023, based on the December 31, 2021, account balances. Your second RMD is due by December 31, 2023, based on the December 31, 2022, account balances.

Reach age 72 in 2023: If you reach age 72 in 2023, you don’t have an RMD requirement for 2023. Your first RMD is for 2024, the year you reach age 73, and is due by April 1, 2025.

Reach age 73 in 2023: If you reach age 73 in 2023, you were 72 in 2022 and must take your first RMD for 2022 by April 1, 2023, based on your December 31, 2021, account balances.

RMDs from a retirement plan

To satisfy the RMD requirements in a retirement plan, you must take RMDs separately from each of your retirement plans. If you reached age 72 in 2022, your first RMD for 2022 is due by April 1, 2023, based on your December 31, 2021, account balance. Your 2023 RMD is due by December 31, 2023, based on your December 31, 2022, account balance.

If you’re still employed by the plan sponsor, and not a 5% owner, your plan may allow you to delay taking RMDs from that workplace retirement plan until you retire. IRS rules always require you to take RMDs beginning at age 72 from traditional IRAs, SEP, SIMPLE and SARSEP IRA plans, even if you’re still employed.

For more information about the age 72 or 73 distribution requirements, see the latest RMD news release and IRS.gov/rmd.

Status of proposed regulations to update mortality tables; Scope of Notice 2022-22

On April 27, 2022, the Internal Revenue Service and the Department of the Treasury released proposed regulations to update the mortality tables that are used under Internal Revenue Code Section 430(h) to calculate minimum required contributions for single-employer defined benefit pension plans. The regulations are proposed to be first effective for plan years beginning in 2023.

The IRS also released Notice 2022-22 PDF on April 27, 2022. Notice 2022-22 provides mortality tables that apply for valuation dates occurring during 2023 pursuant to the existing regulations under Section 430(h) and specifies a mortality improvement scale that applies under those regulations.

An April 28, 2022, Employee Plans newsletter, explained that if the proposed regulations are finalized effective for plan years beginning on or after January 1, 2023, then the mortality tables provided in Notice 2022-22 will apply for purposes of calculating minimum required contributions only for a plan with a plan year that begins in 2022 and that has a valuation date in 2023.

The IRS and the Department of the Treasury are no longer planning to finalize those proposed regulations with an effective date during 2023. Therefore, pursuant to existing regulations, the mortality tables provided in Notice 2022-22 will apply for purposes of calculating minimum required contributions for a valuation date in 2023 for all plans.

Notice 2022-22 also provides a modified version of the mortality tables used under Section 430(h) to determine the minimum amount of a lump-sum distribution from a defined benefit pension plan for stability periods beginning during 2023. The applicability of this mortality table for 2023 is not affected by the delay in the finalization of the proposed regulations.

The IRS Nationwide Tax Forum wrapped up in August with more than 10,000 tax professionals attending the virtual sessions. IRS Employee Plans presented the seminar, Retirement Plans: Avoid These Pitfalls When Managing Your Small Employer Plan.

Checklists: Part of our presentation focused on a series of plan checklists that may help small business owners keep their plans in compliance.

• 401(k) plan checklist PDF
• SEP plan checklist PDF
• SIMPLE IRA plan checklist PDF
• SARSEP IRA plan checklist PDF

Chat Questions: We received several questions in the chat feature in the booth and during the presentation. Following are answers to some of the most common questions.

1. The plan sponsor is responsible for all things having to do with the plan, from determining when employees enter the plan, to distributions, to filing the Form 5500 series returns.
   • If you purchase or set up a plan with a financial institution or hire an advisor to help with your plan, make sure you understand exactly what they’re going to do for you. In the end, the plan sponsor is responsible for administering the plan.
2. SEP, SIMPLE, and SARSEP IRA-based plans do not file a Form 5500 series return.
3. A one-participant 401(k) plan can allow for both pre-tax salary deferrals and after-tax Roth salary deferrals, but the plan document must include language for both.
4. Contributions made to a Roth IRA are not affected by amounts contributed to a Roth 401(k) plan.
   • Contributions you make to a Roth IRA are limited based on your filing status and income. Roth 401(k) deferrals do not affect amounts you can contribute to a Roth IRA. Limits for 2022:
     • $6,000
     • Plus $1,000 age 50 catch-up
   • Amounts an individual contributes in a Roth 401(k) plan are limited by IRC 402(g). Roth IRA contributions do not affect amounts you can defer in a Roth 401(k) plan. Limits for 2022:
     • $20,500
     • Plus $6,500 age 50 catch-up

5. In a SEP IRA plan, all eligible employees (including the owner) must receive the same percentage of any contribution made to the SEP.

6. Deductions for contributions to your traditional IRA may be limited if you or your spouse is covered by a workplace retirement plan. Contributions to your IRA don’t affect (and are not affected by) contributions in a workplace retirement plan.

Contributions to your IRA don’t affect (and are not affected by) contributions in a workplace retirement plan.

Retirement plans video series: These short videos provide an overview of the key features of many types of plans adopted by small employers.

What you Should Know About Retirement Plans:

• Profit-sharing plans
• 401(k) plans
• Defined benefit plans

What you Should Know About IRA-Based Plans:

• SEP IRA plans
• SIMPLE IRA plans
• SARSEP IRA plans
• Payroll deduction IRAs

Choosing a Retirement Plan:

• Retirement plans for small employers and self-employed
• Retirement plans for small employers and self-employed (SP)

Pre-approved plan deadline – July 31, 2022

If you have a pre-approved profit-sharing, 401(k) or other defined contribution plan, your two-year window to adopt a newly updated pre-approved plan ends on July 31, 2022.

File 2021 Form 5500-EZ electronically using EFAST2

Plan sponsors must file their Form 5500 series returns by July 31, 2022, for 2021 calendar year plans. File a Form 5558 if you need more time to file your Form 5500 series return, Form 8955-SSA, or Form 5330.

A one-participant plan or a foreign plan required to file an annual return must file Form 5500-EZ:

• Electronically using the Department of Labor’s EFAST2 filing system, or
• On paper with the IRS.

Plan sponsors are encouraged to file their 2021 Form 5500-EZ electronically. It’s safe, easy to complete and you have an immediate record that the return was filed.

If you’re required to file at least 250 returns of any type with the IRS, you must file Form 5500-EZ electronically using EFAST2. See the Form 5500 Corner for more filing information.

Plans retroactively adopted after the end of the plan year

If an employer adopts a plan during the employer’s 2022 taxable year (but not later than the due date, including extensions, for filing the employer’s 2021 tax return)

• and elects to treat the plan as having been adopted as of the last day of the employer’s 2021 taxable year,
• then the plan sponsor will not be required to file a Form 5500 series return for the plan year that begins during the employer’s 2021 taxable year.

Instead, the first Form 5500 series return required to be filed with respect to the plan will be the 2022 return. The plan sponsor must check Box E in Part I on the 2022 Form 5500 series return indicating that the employer elects to treat the plan as retroactively adopted as of the last day of the employer’s 2021 taxable year.

For a defined benefit plan, attach a 2021 Schedule SB to the 2022 Form 5500 series return, in addition to a 2022 Schedule SB. See the instructions for a more complete explanation.

Form 5300 electronic submission

The IRS revised Form 5300, Application for Determination for Employee Benefit Plan, and its instructions, to submit the form electronically.

All Form 5300 determination applications must be submitted electronically at Pay.gov. Do a search on Pay.gov for 5300 to find the form and follow the directions on that webpage. See apply for a determination letter for more information.

TE/GE actuary job openings

The IRS Tax Exempt and Government Entities Division currently has eight openings for Actuary GS 14 positions across the country. The application deadline is July 22, 2022.

Actuaries in TE/GE are responsible for private letter ruling requests, assisting with guidance projects, and working closely with revenue agents on pension plan examinations to provide technical expertise and assistance.

The basic educational requirements include a bachelor’s degree with courses in actuarial science, mathematics, relevant statistics, business, finance, economics, insurance, or computer science totaling at least 24 semester hours. You must have at least 12 semester hours of mathematics that include differential and integral calculus, and one or more mathematic courses for which these calculus courses were prerequisites.

You must include a college transcript with your application for it to be considered. For more information about available actuarial positions at the IRS, do a keyword search for ‘1510’ on usajobs.gov.

New 90-day pre-examination compliance pilot

The IRS Employee Plans function is piloting a pre-examination retirement plan compliance program beginning in June 2022. This program will notify a plan sponsor by letter that their retirement plan was selected for an upcoming examination.

The letter gives a plan sponsor a 90-day window to review their plan’s document and operations to determine if they meet current tax law requirements. If you don’t respond within 90 days, we’ll contact you to schedule an exam.

If your review reveals mistakes in the plan’s documents or operations, you may be able to self-correct these mistakes using the correction principles in our voluntary compliance program (EPCRS), described in Revenue Procedure 2021-30 PDF.

If you find mistakes during your review that aren’t eligible to be self-corrected, you can request a closing agreement. We’ll use the Voluntary Correction Program fee structure to determine the sanction amount you pay under a closing agreement.

The IRS will review your documentation and determine if we agree with your conclusions and that you appropriately self-corrected any mistakes. We’ll then issue a closing letter or conduct either a limited or full scope examination.

Our goal with this program is to reduce taxpayer burden and reduce the amount of time spent on retirement plan examinations. At the end of this pilot, we’ll evaluate its effectiveness and determine if it should continue to be part of our overall compliance strategy.

Form 5300 electronic submission

The IRS is revising Form 5300, Application for Determination for Employee Benefit Plan, and its instructions, to be submitted electronically.

Beginning June 1, 2022, you’ll be able to submit a Form 5300 determination application electronically at Pay.gov. Do a search on Pay.gov for 5300 to find the form and follow the directions on that webpage. The IRS will continue to accept paper versions of Form 5300 through June 30, 2022.

You'll receive a confirmation e-mail after you submit your Form 5300 application through Pay.gov that is your acknowledgement notice. The IRS does not mail a separate acknowledgement letter for Pay.gov submissions.

Pay.gov will accept one additional PDF document (less than 15MB) as part of your submission. Remove any items over the 15MB limit before you submit. Fax any remaining documents to 844-255-4818. To have the information associated with your application, include a fax coversheet that contains the Pay.gov Tracking ID, employer name, EIN, and the plan name listed on the submitted Form 5300. Contact IRS Customer Accounts Services at 877-829-5500 for additional help.

The user fee for a Form 5300 submitted on or after January 3, 2022, is $2,700 (or $4,000 for multiple employer plans) if the plan does not qualify for the zero-dollar user fee in Notice 2017-1. Applicants must pay the user fee through Pay.gov for an electronic submission using a bank account, credit card, or debit card.

See Revenue Procedure 2022-4 for the latest procedures and user fees for determination letter requests.

Issue Snapshots

Issue Snapshots are technical discussions of retirement plan issues and include technical resources along with audit tips and issue indicators. The most recent Issue Snapshots from Employee Plans are:

• Calculation of plan compensation for partnerships
• Calculation of plan compensation for sole proprietorships
• Deemed distributions – participant loans
• Combined limits under IRC Section 404(a)(7)

Extension of Relief from Physical Presence Requirement

The IRS released Notice 2022-27 PDF which provides a 6-month extension of the relief provided in Notice 2021-40. This notice provides temporary relief of the physical presence requirement, through December 31, 2022, for participant elections that are required to be witnessed by a plan representative or notary republic.

Impact of missed deadline for restatement of pre-approved plans

The IRS reviews pre-approved plan submissions and issues opinion letters (and advisory letters for previous cycles) for each recurring plan amendment cycle. Each cycle provides a window for affected employers to adopt the restated plan. To maintain a plan's status as a pre-approved plan and retain uninterrupted reliance on its opinion letter, an employer must adopt each applicable cycle's restatement by the due date for that cycle.

Missed deadline for 401(a) defined benefit plans

The IRS announces the time period when employers must adopt plan restatements for 401(a) plans for each plan cycle. In Announcement 2018-05, the IRS opened the 2-year restatement window for defined benefit plans approved for Cycle 2, ending on April 30, 2020, that was subsequently extended to July 31, 2020, by Notice 2020-35.

If a restatement is not adopted by the Cycle 2 deadline, an employer's retirement plan is no longer a pre-approved plan. The employer is no longer considered a prior adopter because the employer hasn't timely adopted a pre-approved plan for the cycle immediately preceding the opening of the current cycle. The plan therefore is an individually designed plan, and as a result, the plan must be reviewed to determine if there are form defects in the following areas:

• Any prior interim and discretionary amendments made while the plan was a pre-approved plan will need to be reviewed and corrected if they do not meet the requirements of IRC 401(a).
• The rules for individually designed plans (Rev. Proc. 2016-37, section 5 PDF) would govern the remedial amendment period applicable for those, and all other required changes, to determine how far back the form error occurred if one exists.

If after reviewing the plan and any interim or discretionary amendments, you determine that one or more provisions did not meet the requirements of IRC 401(a), the qualified status can be corrected. As an individually designed plan, your plan would meet the Self Correction Program (SCP) requirement of a prior letter (Rev Proc 2021-30 section 5.01(4) PDF). Reliance on the opinion or advisory letter from when the employer first adopted a pre-approved plan is equivalent to a determination letter (Rev Proc 2015-36, section 19.04).

If you find a defect that has existed for less than the past 3 years, you can correct it under SCP. For older form defects, you would have to file a Voluntary Correction Program (VCP) application to correct the failure.

Missed deadline for 403(b) pre-approved plans

Revenue Procedure 2017-18 provided a 3-year window for an employer to restate their plan if they intended to become an IRC 403(b) pre-approved plan for Cycle 1. That window ended on March 31, 2020, and was subsequently extended to June 30, 2020, by Notice 2020-35.

A 403(b) plan had no pre-approved program prior to Cycle 1. A 403(b) plan that intended to be a pre-approved plan for Cycle 1, but failed to adopt a restatement by June 30, 2020, never became a pre-approved plan. It would be reviewed as an individually designed plan, based on the requirements of Rev. Proc. 2019-39, sections 6-9 PDF.

Since a 403(b) plan could not apply for a determination letter, the prior letter requirement has a more lenient condition to meet. A 403(b) plan meets the favorable letter condition in Rev Proc 2021-30 section 4.03(1), if the employer had a written plan document in place in 2009, or if later, in the year the plan was first adopted.

If you find a defect that has existed for less than the past 3 years, you can correct it under SCP. For older form defects, you would have to file a Voluntary Correction Program (VCP) application to correct the failure.

Conclusion

The failure to qualify as a pre-approved plan is not a qualification issue. Being a pre-approved plan is one method of meeting the requirement to have an updated written plan document. If the employer who sponsors a plan does not timely adopt a current pre-approved plan, it can still meet the written document requirements as an individually designed plan. Individually designed plans that don't meet those requirements can be self-corrected under the circumstances detailed in Rev. Proc. 2021-30, Part IV.

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If you have questions about this study, please contact us at irsgovtesting@irs.gov.

2023 Internal Revenue Service Advisory Council

The IRS is accepting applications for the Internal Revenue Service Advisory Council for 2023 through June 3, 2022. Members are appointed to three-year terms beginning in January 2023.

IRSAC is the advisory body to the IRS Commissioner and provides an organized public forum for discussion of relevant tax administration issues between IRS officials and representatives of the public.

IRSAC members are drawn from substantially diverse backgrounds representing a cross-section of the taxpaying public. Nominations of qualified individuals may come from individuals or organizations. The IRS is seeking applications from a variety of tax specialties, including individuals with substantial experience in retirement plans, charities and tax-exempt organizations.

The advisory council

• Proposes enhancements to IRS operations
• Makes recommendations to improve taxpayer service, compliance and tax administration
• Discusses relevant information reporting issues
• Addresses matters concerning tax-exempt and government entities, including retirement plans
• Conveys the public’s perception of professional standards and best practices for tax professionals

For more information on IRSAC and how to apply, go to the IRSAC’s webpage. If you have questions about the application process, please email us at publicliaison@irs.gov.

Proposed regulations to update mortality tables

The Internal Revenue Service and the Department of the Treasury released proposed regulations to update the mortality tables that are used under Internal Revenue Code Section 430(h) to calculate minimum required contributions for single-employer defined benefit pension plans. The regulations are proposed to be first effective for plan years beginning in 2023.

The IRS also released Notice 2022-22 PDF to provide mortality tables that apply pursuant to the existing regulations under Section 430(h). Assuming the new proposed regulations are finalized effective for plan years beginning on or after January 1, 2023, the mortality tables provided in Notice 2022-22 will apply for purposes of calculating minimum required contributions only for a plan with a plan year that begins in 2022 and that has a valuation date in 2023.

Notice 2022-22 also sets forth a modified version of the mortality tables used under Section 430(h) that is used to determine the minimum amount of a lump-sum distribution from a defined benefit pension plan. This table will apply for 2023 even if the new regulations are finalized with a 2023 effective date.

The mortality tables in the proposed regulations are derived from the tables set forth in the Pri-2012 Private Retirement Plans Mortality Tables Report issued by the Retirement Plans Experience Committee (RPEC) of the Society of Actuaries. That report is based on the most recent large-scale study of the mortality experience of pension plan participants, which used data from calendar years 2010 through 2014. The mortality rates in the proposed regulations are developed by adjusting the mortality experience from that study for improvements in mortality experience since 2012 and expected improvements into the future.

For 2023, the mortality improvement rates are from the Mortality Improvement Scale MP-2021 Report, the latest update to RPEC's annual study of mortality improvement. This report, issued in 2021, was prepared based on actual mortality experience from 2013 through 2019 (the most recent year for which the data was available) and assumptions for later improvements in mortality.

The MP-2021 mortality improvement rates don't take into account actual mortality experience in 2020 and 2021, the first years affected by the COVID-19 pandemic. The long-term mortality improvement rates also don't reflect any adjustment for the effect of COVID-19 on expected mortality rates in the long term. To the extent there is a long-term impact on mortality rates from COVID-19, the IRS and the Treasury Department expect that RPEC will reflect that impact in future mortality improvement scales, which the IRS and Treasury Department could then specify for use under Section 430(h) in future guidance.

IRS suspends mailing

The IRS is suspending the issuance of several notices generally mailed to tax-exempt or governmental entities in case of a delinquent return. Due to the historic pandemic, the IRS hasn’t yet processed several million returns filed by individuals and entities. The suspension of the notices will help avoid confusion when a filing is still in process.

The IRS will continue to assess the inventory of pending returns to determine the appropriate time to resume mailing these notices. Some taxpayers and tax professionals may still receive the notices during the next few weeks. Generally, there is no need to call or respond to the notices as long as the return was filed timely.

The suspended notices are:

IRS meeting for pre-approved plan providers and mass submitters: Discussion of cycle 2 403(b) pre-approved plan submissions

The IRS will host a virtual meeting with pre-approved plan providers and mass submitters to discuss technical and procedural requirements for the upcoming Cycle 2 403(b) pre-approved plans submission period.

When: Tuesday, April 26, 2022

12:00pm – 1:30pm Eastern Time

Who should attend: This meeting is intended for providers and mass submitters who draft pre-approved plans and will apply for a Cycle 2 403(b) opinion letter under Revenue Procedure 2021-37. We anticipate this meeting will be mutually beneficial for the providers, mass submitters, and the IRS.

Register: Please send an email to cameron.r.kalchert@irs.gov by April 8, 2022, if you’re interested in attending and we’ll provide you with instructions for joining the meeting.

Publication 590-B

The IRS updated Publication 590-B in February for use in preparing 2021 returns. Pub 590-B includes the updated life expectancy tables to use for all required minimum distributions due from your retirement plan or IRA on or after January 1, 2022. These new tables generally reflect longer life expectancies which should lead to lower required distribution amounts.

RMD deadline - April 1, 2022

Participants in retirement plans and IRA account holders who turned age 72 in 2021 (after June 30) must receive their first required minimum distribution (RMD) by April 1, 2022. If you’re still working for the business sponsoring the retirement plan, you can delay taking your first RMD from the plan until after you retire. This exception does not apply to 5% owners of the business, or to traditional, SEP and SIMPLE IRA accounts.

Life expectancy tables were updated for 2022, so the table used to figure your 2022 RMD is different than the version to use for your 2021 RMD. The updated tables will generally lead to smaller required withdrawals for 2022 and future years.

For a 2021 RMD (due April 1, 2022), use the life expectancy tables in Appendix B of the Pub. 590-B PDF used for preparing 2020 returns. For example, an unmarried person using Table III, the RMD for a person age 72 in 2021 will be based on a distribution period of 25.6 years. Divide the Dec. 31, 2020, balance by 25.6 to get the RMD for 2021.

For a 2022 RMD (due Dec. 31, 2022), use the revised life expectancy tables in Appendix B of the Pub. 590-B PDF used for preparing 2021 returns. In our example of an unmarried person, now age 73, using the revised Table III, the RMD will be based on a distribution period of 26.5 years. Divide the Dec. 31, 2021, balance by 26.5 to get the RMD for 2022.

Revised Form 5316 must be used by June 1, 2022

In December 2021, the IRS revised Form 5316, Application for Group or Pooled Trust Ruling. Using the current version of Form 5316 may prevent processing delays and avoid the return of your group or pooled trust application.

Beginning June 1, 2022, you must use the Form 5316 with a revision date of December 2021, or your application will be returned. Find the version of any IRS form on the bottom right-hand corner of any page of the form.

Current and prior versions of most IRS forms and publications can be found using a keyword search at IRS.gov/forms. You should always ensure you’re using the most recent version of any IRS form.

Proposed regulations: Required minimum distributions

The IRS published proposed regulations on Internal Revenue Code Section 401(a)(9). These proposed regulations address required minimum distribution requirements for retirement plans and IRAs.

We encourage you submit your comments electronically via the Federal eRulemaking Portal. Enter REG-105954-20 in the search box and follow the online instructions to submit your comment. You may submit comments on paper; however, due to limited personnel, comments submitted on paper will be considered to the extent possible. The comment period closes on May 25, 2022.

403(b) Pre-approved plan providers: Cycle 2 submissions

The IRS released Revenue Procedure 2021-37 PDF, which provides procedures for issuing opinion letters for IRC 403(b) pre-approved plans for the second remedial amendment cycle (Cycle 2). It sets the submission period for providers and mass submitters to submit on-cycle applications for Cycle 2 opinion letters starting on May 2, 2022, and ending on May 1, 2023. It also sets the remedial amendment periods for IRC 403(b) pre-approved plans.

403(b) 2022 cumulative list of changes in 403(b) pre-approved plans

In Notice 2022-8 PDF, the IRS established the 2022 Cumulative List of Changes for pre-approved 403(b) plans.

Remove excess salary deferrals by April 15, 2022

The total of all salary deferrals a participant makes to various retirement plans – including 401(k), 403(b), SARSEP and SIMPLE IRA plans – is limited to $19,500 (plus an additional $6,500 if age 50 or over) for 2021.

If you exceed this limit for 2021, you must take corrective action to withdraw the excess deferral amount, plus earnings, by April 15, 2022.

If you withdraw the excess salary deferrals, plus earnings, by April 15:

• Excess deferrals are taxed in the calendar year deferred (2021)
• Earnings on the excess are taxed in the year withdrawn (2022)
• Excess is not subject to the 10% early distribution tax, 20% withholding, or spousal consent requirements

If you don’t withdraw the excess salary deferrals, plus earnings, by April 15:

• Excess deferrals are taxed in the calendar year deferred (2021) and again in the year withdrawn
• Earnings on the excess are taxed in the year withdrawn
• Withdrawals may be subject to the 10% early distribution tax, 20% withholding, and spousal consent requirements
• Make correction to the affected plan using the Self-Correction or Voluntary Correction Programs

Individuals who made salary deferral contributions to two or more retirement plans in 2021 may be most at risk for exceeding the deferral limit. The Interactive Tax Assistant can help you determine how to correct excess salary deferrals.

Retirement plans video series

This IRS video series for small employers and self-employed individuals provides an overview of the key features of many different types of retirement plans.

What you should know about retirement plans: This video series discusses the key features of the qualified retirement plans many small employers have adopted.

• Profit-sharing plans
• 401(k) plans
• Defined benefit plans

What you should know about IRA-based plans: This video series discusses the key features of the IRA-based plans adopted by many small employers.

• SEP IRA plans
• SIMPLE IRA plans
• SARSEP IRA plans
• Payroll deduction IRAs

Retirement plans for small employers and self-employed: This recorded webinar, in English and Spanish, helps you compare the types of retirement plans available for your business or organization.

• Retirement plans for small employers and self-employed
• Retirement plans for small employers and self-employed (SP)