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Employee Plans Compliance Unit (EPCU) - Current Projects – Ineligible Employer – 403(b) Project

Why did I receive an EPCU Compliance Check Letter?

Your 501(c)(3) organization was listed on the Automatic Revocation of Exemption List (see the link below in “Other Resources” for additional information) which may affect your eligibility to sponsor a 403(b) plan.

What is the EPCU attempting to determine?

We want to ensure an employer eligibility failure has not occurred in the sponsoring of your 403(b) plan.

What actions do I need to take?

Complete the Attachment you received and return it along with a copy of the letter to the person whose information is shown on the letter. You may also furnish any other documents or clarifying material that you believe will be helpful for us to review. Please make every effort to provide a complete, accurate, and timely response.

If You Have Questions

Please feel free to contact the person listed in the letter with questions about this project and how it relates to your situation.

Background

Organizations eligible to sponsor Section 403(b) plans include:

  1. Section 501(c)(3) organizations
  2. Educational organizations under Section 170(b)(1)(A)(ii).  Note: A state or political subdivisions thereof including an agency or instrumentality of a state are eligible to sponsor a 403(b) plan for employees who perform services for its schools as defined in Section 170(b)(1)(A)(ii).
  3. A minister as described in Section 414(e)(5)(A).

Internal Revenue Code Section 6033 generally requires all entities exempt from federal income tax under Section 501(a) to file an annual return to report their operations and activities. The Form 990 series return is used for this purpose.  The Pension Protection Act of 2006 added Section 6033(j) which requires small organizations to file an annual notice with the IRS using Form 990-N. This section also provides for the automatic revocation of exempt status for an entity’s failure to file a required return or notice for three consecutive years.

Organizations subject to automatic revocation of their exempt status include Section 501(c)(3) organizations.

Generally, to again be recognized as tax-exempt, the organization must apply for recognition of exemption regardless of whether the organization was required to apply for tax-exempt status originally. If the organization meets reasonable cause for failing to file the required annual notices or returns, the organization’s exempt status may be reinstated. Organizations may also ask to have their status retroactively reinstated to the date of revocation.

For the most current process, please refer to the website links referenced below in “Other Resources”.

Other Resources

Page Last Reviewed or Updated: 27-Nov-2013