IRS releases final § 403(b) regulations

On July 26, 2007 the IRS published final regulations regarding § 403(b) plans and related regulations. Named after the pertinent section of the Internal Revenue Code, § 403(b) plans involve tax sheltered retirement annuities offered by public schools, colleges, universities, and § 501(c)(3) charitable organizations. The final regulations (including commentary) can be viewed in the Federal Register.   

The regulations will take effect, generally, in December 2008, with some exceptions. The IRS press release, Employee Plans News, highlights the impact of the regulations, including effective dates.  Additional information can be found at the IRS’s website.

Although much of the information is publicly available, tax planning is complicated and neither this Blog nor the public information should be mistaken for legal advice. Anyone interested in § 403(b) plans can contact one of the Fox Education Law Group attorneys or, for general tax matters, a member of the Tax Department.

IRS contacting districts about 403(b) plans

According to an IRS news release, a pilot project involving three states has found most school districts are not in compliance with the universal availability requirements of § 403(b) plans. According to the news release, “[t]he law requires that all public school employees normally expected to work 20 hours per week must be offered the opportunity to participate in a § 403(b) plan if the school or district sponsors one.” Substitute teachers, janitors, cafeteria workers and nurses are, according to the IRS, often not included. The noncompliance, according to the news release, appears to be based on a lack of understanding and not any bad intent. 

As a result of the pilot project’s findings, the IRS’s Employee Plans Compliance Unit is sending questionnaires to all public school districts, initially to those in Alaska, Florida, Hawaii, Illinois, Nevada, Pennsylvania, Tennessee and Virginia, and reaching all 50 states by 2008.