Reminder to Keep Eligibility to Sponsor 403(b)

Only certain tax-exempt employers are eligible to sponsor an Internal Revenue Code Section 403(b) plan.

By Rebecca Moore | May 07, 2015
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The Internal Revenue Service (IRS) Employee Plans Compliance Unit conducted a project related to 403(b) plan sponsorship eligibility for organizations that lost their 501(c)(3) exempt status due to the automatic revocation for not filing a required return for three consecutive years.

Some entities were unaware that their 501(c) status affected their eligibility to sponsor a 403(b) plan.

Generally, all entities exempt from federal income tax under Internal Revenue Code Section 501(a) are required to file an annual return reporting their operations and activities under Internal Revenue Code (IRC) Section 6033. Exempt entities must file an annual notice with the IRS using a Form 990 series return (IRC Section 6033(j) as added by the Pension Protection Act of 2006). The exempt status of entities that don’t file a required return or notice for three consecutive years is automatically revoked.

The Internal Revenue Service issued a reminder for tax-exempt organizations that many have a filing deadline for Form 990-series information returns in mid-May. Form 990-series information returns and notices are due on the 15th day of the fifth month after an organization’s tax year ends. Many organizations use the calendar year as their tax year, making Thursday, May 15, the deadline for them to file for 2014.

The Pension Protection Act of 2006 mandates that most tax-exempt organizations file annual Form 990-series informational returns or notices with the IRS. The law, which went into effect at the beginning of 2007, also imposed a new annual filing requirement on small organizations. Churches and church-related organizations are not required to file annual reports.

Small tax-exempt organizations with average annual receipts of $50,000 or less may file an electronic notice called a Form 990-N (e-Postcard), which asks organizations for a few basic pieces of information. Tax-exempt organizations with average annual receipts above $50,000 must file a Form 990 or 990-EZ depending on their receipts and assets. Private foundations file a Form 990-PF.