IRS Guidance

The IRS has issued Revenue Procedure 2022-40, which permits the submission of determination letter applications for 403(b) individually designed plans. Beginning June 1, 2023, plan sponsors that maintain 403(b) individually designed plans can submit a determination letter application for an initial plan determination, for a determination upon plan termination, for certain merged plans, or for other circumstances that will be announced later in the Internal Revenue Bulletin.

The date on which an application may be submitted for an initial plan determination is staggered over three dates (June 1, 2023, June 1, 2024, and June 1, 2025), depending on the last digit of the plan sponsor’s employer identification number.

Under the revised rules, the IRS generally will consider the qualification requirements and the 403(b) requirements that are in effect, or that have been included, on a required amendments list, on or before the last day of the second calendar year preceding the year in which the determination letter application is submitted. Additionally, a prior letter issued to a pre-approved plan adopter is not treated as an initial plan determination. For example, a determination letter issued to an adopter of a pre-approved retirement plan as a result of filing Form 5307, Application for Determination for Adopters of Modified Volume Submitter Plans, is no longer considered in determining whether a plan sponsor is eligible to submit that plan for a determination letter for an initial plan determination on Form 5300, Application for Determination for Employee Benefit Plan.

The IRS indicates that it will release additional procedural requirements and forms updates in the near future.

The IRS has issued its 2022-2023 Priority Guidance Plan, in which it describes guidance projects in the current fiscal year. Many items in the plan have appeared in prior years’ Priority Guidance Plans. A number of the guidance items deal with retirement savings arrangements, including the following, which have been included in previous plans.

• Regulations and guidance relating to the 10 percent early distribution tax
• Comprehensive IRA regulations
• Final regulations on the application of the normal retirement age regulations under Internal Revenue Code Section (IRC Sec.) 401(a) for governmental plans
• Regulations and guidance updating electronic delivery rules for providing applicable notices and making participant elections
• Final regulations regarding RMD requirements under the SECURE Act (proposed regulations were published in February 2022)
• Regulations relating to SECURE Act modifications to certain rules governing 401(k) plans
• Guidance on student loan payments and their interplay with qualified retirement plans and 403(b) plans
• Guidance on closed defined benefit plans and related matters
• Regulations on the exception to the unified plan rule for IRC Sec. 413(e) multiple employer plans (proposed regulations were issued in July 2019)
• Regulations on the definition of "governmental plan"
• Final regulations updating minimum-present-value requirements for defined benefit pension plans (proposed regulations were issued in November 2016)
• Regulations on mortality tables to determine present value for single-employer defined benefit pension plans
• Final regulations for withholding on distributions when payments are made to a non-U.S. address (proposed regulations were issued in May 2019)
• Regulations relating to the IRC Sec. 6057 reporting requirements (proposed regulations were issued in June 2012)
• Guidance updating electronic filing requirements for employee plans to reflect changes made by the Taxpayer First Act

 Two new noteworthy items include

• Regulations relating to the timing of the use or allocation of forfeitures in qualified retirement plans
• Regulations on the definition of church plan under IRC Sec. 414(e)

The IRS has issued Revenue Procedure 2022-38, which contains cost-of-living adjustments for taxable years beginning in 2023 for over 60 tax provisions, including the following health and welfare benefits.

Cafeteria Plans

The dollar limitation under Internal Revenue Code Section (IRC Sec.) 125(i) on voluntary employee salary reductions for contributions to health flexible spending arrangements is $3,050, up from $2,850 for 2022. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $610, up from $570 for 2022.

Qualified Transportation Fringe Benefit

The monthly limitation under IRC Sec. 132(f)(2)(A) for the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $300, up from $280 for 2022. The monthly limitation under IRC Sec. 132(f)(2)(B) for the fringe benefit exclusion amount for qualified parting is $300, up from $280 for 2022.

Qualified Small Employer Health Reimbursement Arrangement

To qualify as a qualified small employer health reimbursement arrangement under IRC Sec. 9831(d), the arrangement must provide that the total amount of payments and reimbursements for any year cannot exceed $5,850 or $11,800 for family coverage, up from $5,450 or $11,050 for family coverage for 2022.

For additional information on the 2023 inflation-adjusted limits for other tax provisions, see Rev. Proc. 2022-38.

The IRS has released Notice 2022-53, announcing its intent to issue final regulations related to required minimum distributions (RMDs) that will apply no earlier than the 2023 distribution calendar year.

As previously announced, the IRS issued proposed regulations in February 2022. The proposed regulations clarify distribution requirements when an account owner dies after the required beginning date (RBD). The IRS proposal requires beneficiaries subject to the 10-year rule to deplete their account balance by the end of the year that contains the tenth anniversary of the original account owner’s death, and take annual distributions based on the normal single life expectancy calculation.

As this requirement applies to beneficiaries of such account owners who died in 2020 or later, the IRS acknowledges that beneficiaries were not aware of the requirement to take an RMD in 2021 and, pending the issuance of final regulations, were unsure of the requirements for 2022. Therefore, the IRS provides that a defined contribution plan that failed to make this specified RMD will not be treated as having failed to satisfy the RMD requirements. Additionally, designated beneficiaries of a plan participant or IRA owner who failed to take this specified RMD will not be assessed a missed RMD excise tax.

This specified RMD relief is limited to distributions required to be made in 2021 or 2022 under the new 10-year rule in a defined contribution plan or IRA for a designated beneficiary if

• the account owner died on or after the RBD in 2020 or 2021, and
• the designated beneficiary is not taking life expectancy payments.

The same relief under the new 10-year rule also applies to the beneficiary of an eligible designated beneficiary if

• the eligible designated beneficiary died in 2020 or 2021, and
• that eligible designated beneficiary was taking life expectancy payments.

This guidance provides plan sponsors and beneficiaries with specified RMD relief for 2021 and 2022 while the IRS finalizes its RMD rule for the 2023 distribution year. However, the Notice does not provide any additional guidance on the status of the rest of the proposed RMD rules for the 2022 distribution year. While the proposed RMD regulations required beneficiaries to apply existing rules and a reasonable, good faith interpretation of the proposed rule for 2021, neither the proposed rule or the Notice state such reasonable, good faith interpretation can be applied for 2022. 

The IRS has issued a proposed rule to increase the renewal fee for Enrolled Actuaries from $250 to $680. The current user fee was set in 2007. Enrollment is for a three-year term, and individuals granted enrollment or renewal as an enrolled actuary may perform actuarial services under ERISA and practice before the IRS as provided in Circular 230.

Public comments will be accepted until December 5, 2022. A public hearing has been scheduled for December 16, 2022, at 10 a.m. ET. The proposed increase would become effective 30 days after publication of a final rule in the federal register.

The IRS has announced the postponement of certain tax-related deadlines for victims of severe storm, flooding, and landslides in Alaska. The tax relief postpones various tax filing deadlines that began on September 15, 2022.

The IRS issued Notice 2022-45 which extends the deadline for amendments to retirement plans and individual retirement arrangements (IRAs) to adopt some provisions relating to distributions and loans under the CARES Act and the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act). The Notice provides that qualified plans, IRAs, and non-governmental 403(b) plans must be amended to adopt applicable provisions of each act no later than December 31, 2025. The previous deadline for such amendments under Notice 2020-50 and Notice 2020-28 IRB 35 was December 31, 2022.

The IRS has announced the postponement of certain tax-related deadlines for victims of hurricane Fiona in Puerto Rico. The tax relief postpones various tax filing deadlines that began September 17, 2022. Affected individuals and households who reside or have a business in in all 78 municipalities in Puerto Rico, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

The IRS has issued Notice 2022-40, which contains updated guidance on factors used in certain defined benefit (DB) pension plan minimum funding and present value calculations. Updates include the corporate bond monthly yield curve, the corresponding spot segment rates for September used under Internal Revenue Code Section (IRC Sec.) 417(e)(3), and the 24-month average segment rates under IRC Sec. 430(h)(2). IRC Sec. 417 contains definitions and special rules for minimum survivor annuity requirements in DB plans. IRC Sec. 430 addresses minimum funding standards for single-employer DB plans.

The IRS has announced the postponement of certain tax-related deadlines for victims of severe storms in Arizona. The tax relief postpones various tax filing deadlines that began July 17, 2022. Affected individuals and households who reside or have a business in the Salt River Pima-Maricopa Indian Community, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after July 17, 2022, and before November 15, 2022, will have until November 15, 2022, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after July 17, 2022, and before November 15, 2022.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS to request relief.