Are You an Ineligible 403(b) Plan Sponsor?


If your organization was never eligible to sponsor its 403(b) retirement plan, use the IRS Employee Plans Compliance Resolution System's Voluntary Correction Program (VCP) to resolve this failure.

Who may sponsor a 403(b) plan?

"Eligible employers" that may sponsor a 403(b) plan are:

  • IRC Section 501(c)(3) tax-exempt organizations,
  • public education organizations (IRC Section 170(b)(1)(A)(ii)),
  • ministers (defined by IRC Section 414(e)(5)(A)), and
  • a state, including a political subdivision of a state, or any agency or instrumentality of a state for its public school employees (IRC Section 170(b)(1)(A)(ii)). An Indian tribal government is treated as a state (IRC Section 7871(a)(6)(B).


Consequences of an ineligible employer adopting a 403(b) plan

If your organization was never eligible to sponsor a 403(b) plan and you don't submit this error under the VCP:

  • your organization must withhold and pay payroll taxes from the contributions to the plan, and
  • plan participants are liable for additional income tax because the contributions aren't tax-deferred.

Voluntary Correction Program

Eligibility - you can use VCP if:

  • your organization or 403(b) plan is not "under examination" by the IRS (see Revenue Procedure 2021-30 PDF, Section 5.08),
  • you immediately stop making salary reduction and employer contributions to the 403(b) plan, and
  • you keep the 403(b) assets in the issued annuity contracts or custodial accounts and don't distribute them before one of the distributable events in IRC Section 403(b).

Be sure you've complied with all other 403(b) plan rules, including the written plan requirement, universal availability, 403(b) distribution rules and any other requirement under IRC section 403(b) (Revenue Procedure 2021-30, Section 6.03).

Benefits - making a VCP submission benefits your organization and your 403(b) plan participants because:

  • contributions can remain in the 403(b) annuities or custodial accounts,
  • participants' 403(b) annuities and custodial accounts retain their tax-favored status, and
  • your organization avoids penalties.

Make a VCP submission

Prepare and Collect VCP submission Documents

Include these items in your VCP submission:

  1. Form 14568, Model VCP Submission Compliance Statement PDF. This form is a model compliance statement. Use attachments to explain the failure, how you'll correct it, and what steps you'll take to make sure the error won't occur again.
  2. Form 14568-F, Model VCP Compliance Statement Schedule 6 Employer Eligibility Failure (401(k) and 403(b) Plans Only) PDF.
  3. A copy of the signed and dated written 403(b) plan your organization adopted to comply with the final 403(b) income tax regulations.
  4. Required statements for submissions involving 403(b) plans that are signed and dated include:
    • a statement describing the plan sponsor’s employer type. For example, "The plan sponsor is a ______". Be sure to enter the correct type, such as "local public school district," "public university," or "charitable organization exempt from tax under Section 501(c)(3)."
    • a statement that the plan sponsor has contacted all other entities involved with the plan and has been assured of their cooperation to the extent necessary to implement the adoption of the written plan
    • the plan sponsor's name, plan number, and EIN at the top of the page that includes the statements.
  5. If applicable, Form 2848, Power of Attorney and Declaration of Representative PDF (Instructions to Form 2848 PDF) or Form 8821, Tax Information Authorization PDF. See additional details below.

All completed documents will have to be converted to PDF documents. Combine all documents in this list into a single PDF file. If combined file exceeds 15MB, remove some documents so that it does not exceed this limit. The documents that could not be included in the combined PDF file can be faxed to the IRS using 855-203-6996.

Make your VCP submission via

  1. Go to and create an account
  2. After signing in, search for Form 8950, Application for Voluntary Correction Program
  3. Click on the link that will take you to the version of Form 8950
  4. Follow the Form 8950 Form 8950 Instructions PDF on
  5. Upload the VCP submission documents and pay the applicable user fee

Additional resources