IRS Starts Higher Ed 403(b) Compliance Check

The project, which builds upon a similarly focused 403(b) pilot project involving K-12 public schools, focuses on higher education organizations sponsoring Internal Revenue Code (Code) section 403(b) plans and their satisfaction of Universal Availability (UA) non-discrimination rules and new plan document requirements.  For purposes of the project, higher education organizations refers to academies, universities, colleges, seminaries, institutes of technology, and other collegiate level organizations, such as vocational and trade schools that award academic degrees or professional certifications, the IRS said.  

The project will give higher education organizations the chance to identify problems with their plans and to correct them on their own.  

EPCU will mail the compliance contact letter and information request package to a random national sample of over 300 large, medium, and small public and private higher education organizations sponsoring 403(b) plans. The information request package includes a 21 question Form 886-A “Explanation of Items”, Instructions for completing and returning, and a Glossary of commonly used terms. The sponsoring organization will be asked to complete Form 886-A for the 2010 calendar year and return to the Internal Revenue Service by fax, postal mail, or e-mail, as described in the instructions and cover letter.   

Also included in the package will be “403(b) Plan Informational Attachment #1” describing new plan document requirements and the coordination of employee catch-up deferrals. Responses will be evaluated and a determination made as to whether the plan appears to be compliant. If the sponsoring organization appears compliant, the contact will be resolved, and a closing letter will be issued notifying the sponsoring organization.   

If the response is unclear, additional clarifying information may be requested. If a potential problem is identified, the IRS will correspond with the sponsoring organization to help it analyze its 403(b) plan to determine if it’s in noncompliance. If the sponsoring organization finds a problem, they should use one of the correction methods outlined in the IRS follow-up letter.  

The IRS said the information gathered from this project will ultimately result in a report issued by the IRS describing responses and identifying  areas where additional 403(b) education, guidance, and outreach is needed and how it can focus enforcement efforts to address and/or avoid non-compliance in UA and new plan document requirements for organizations involved in higher education.  

More information is at http://www.irs.gov/retirement/article/0,,id=238459,00.html.