IRS Announces 403(b) Employee Retirement Plan Compliance Project
June 3, 2011
The IRS is launching another large-scale compliance project aimed at colleges and universities, examining the Universal Availability (UA) and written plan document requirements for 403(b) employee retirement plans. Approximately 300 public and private institutions offering 403(b) plans will be mailed a compliance contact letter and asked to complete and return a 21-question survey (Form 886-A).
The Employee Plans Compliance Unit and the Office of Research and Analysis of the Tax Exempt and Governmental Entities division of IRS (TE/GE) announced the plan to assess compliance at institutions of higher education, building on a recent program focused on K-12 schools. In addition to traditional colleges and universities, the 403(b) compliance project will include postsecondary vocational and trade schools that confer academic degrees or professional certifications.
Universal Availability and Written Plan Rules: IRS audits of 403(b) plans have repeatedly uncovered employer plan sponsors' failure to meet the UA requirements and the issue has been identified by IRS has one of the top ten operational deficiencies in plans.
The Universal Availability rule states that if any employee is permitted to make elective salary deferrals to a 403(b) plan, then all employees (with few exceptions), must be allowed the same opportunity. Two key components of UA are eligibility and effective opportunity. Eligibility relates to determining which employees may defer salary. Effective opportunity involves an eligible employee's practical ability to participate in deferral. The 2007 final regulations (which became effective in 2009) clarified the UA rule and eliminated certain good faith safe harbor exclusions that had been in place since 1989.
The final rules also require that employers formalize their 403(b) written plans, explaining plan terms and specifying how statutory and regulatory requirements will be met.
If You Receive a Letter: Detailed instructions and further information related to completing the Form 886-A and contacting the IRS with questions is available on the IRS project information page.
According to the IRS, institutions receiving the survey will have the opportunity to identify and correct problems with their plans. Sanction relief will be available to those that do so in a timely manner.
- Letter 1562-X, 403(b) Cover Letter
- Form 886-A, 403(b) Compliance Check Higher Education
- Instructions, 403(b) Compliance Check Higher Education
- Final regulations, 403(b)
- Publication 571, Tax Sheltered Annuity (403(b)) Plans)
- Publication 4546, 403(b) Plan Checklist
Director, Tax Policy
- Task Force Urges Regulatory Reform
- Legislators Take Action on Education, Charitable and Research Incentives
- Associations Comment on College Ratings System
- ON-DEMAND: How to Build, Develop, and Support a Compliance Program at Your Institution
- ON-DEMAND: Strategic Tuition Assessment and Tuition Restructuring
- ON-DEMAND: Are Shared Services Right for Your Organization – The KU Journey
- ON-DEMAND: VIRTUAL: 2014 Annual Meeting
- ON-DEMAND: VIRTUAL: Student Financial Services Conference
- ON-DEMAND: VIRTUAL: Higher Education Accounting Forum
- A Guide to College and University Budgeting: Foundations for Institutional Effectiveness, 4th ed. - by Larry Goldstein
- NACUBO's Guide to Unitizing Investment Pools - by Mary S. Wheeler
- Managing and Collecting Student Accounts and Loans - by David R. Glezerman and Dennis DeSantis