NAICU Washington Update

IRS Looking at College and University Retirement Plans

June 14, 2011

The IRS is yet again looking into possible tax-code violations at colleges and universities, and this time the focus is on how well the institutions are complying with federal rules on tax-deferred 403(b) retirement plans.
In late 2008, the IRS announced it would be investigating various finance practices on campuses, including executive compensation, business activity and endowment function.

The agency has announced that it is sending questionnaires to a random sampling of 300 large and small, public and private institutions across the country. The concern behind the investigation is that 403(b) plans could inappropriately benefit highly compensated employees. Under federal rules, institutions generally have to offer these plans to all employees equally.  The questionnaire also asks about the institution's written documentation of the retirement plan, which is required by law.

According to the IRS, the survey is intended to help institutions correct errors in plan management, and mistakes will not automatically lead to an audit - though failure to respond by the deadline could trigger an audit, however.  NAICU encourages the colleges and universities chosen as part of the sampling to provide a thorough and timely response to the questionnaire.

Please let us know if your institution receives this questionnaire by contacting Karin Johns, NAICU's Director of Tax Policy, at