If Your School Receives an IRS Questionnaire about its 403(b) Program, You Should Read this Alert Before Responding!
Within the last few weeks, many schools in Indiana have received a questionnaire from the Internal Revenue Service (IRS) asking about the school's 403(b) program and its compliance with the "universal availability rule." Schools should be very careful in how they complete the questionnaire.
In 2007, the IRS announced an expansion to all fifty states of a previously limited "outreach" effort aimed at ensuring 403(b) plan compliance with the universal availability rule. The universal availability rule requires schools to allow all employees, including substitute teachers, cafeteria workers, bus drivers, nurses and coaches, to participate in the school's 403(b) program and to notify all employees of this opportunity. Schools can exclude employees who work less than 1,000 hours a year from participating, but must exclude all
such employees to take advantage of this exclusion. The IRS' initial pilot program, limited to three states, found significant noncompliance by schools with this rule.
Under its expanded program, the IRS has begun sending questionnaires to all
schools requesting information as to which employees are offered the opportunity to participate in the 403(b) plan. If the IRS determines that a school has not complied with the universal availability rule, the school will be required to correct the problem to avoid a sanction. To correct for noncompliance, a school is required to make a vested contribution for each eligible employee for each year that the employee was improperly excluded from participating in the 403(b) plan, as well as any matching contribution that would have been made by the school if the employee had actually made that contribution.
If you would like more information regarding the universal availability rule or would like assistance in responding to an IRS questionnaire, please contact Mary Beth Braitman,
Jim Kemper, Tara Schulstad Sciscoe or
Wayne McClain III.
Click here for a copy of the IRS' questionnaire and compliance contact letter. | 