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Retirement News for Employers - Spring 2011 - Higher Education Organizations Asked to Confirm Compliance with Universal Availability

A new Employee Plans Compliance Unit project focuses on how higher education organizations apply the universal availability rule to their 403(b) plans. Under this rule, if a 403(b) plan permits any employee to make salary deferrals to the plan, then it must offer the same opportunity to all employees (with limited optional exclusions). Higher education organizations include:

  • academies,
  • universities,
  • colleges,
  • seminaries,
  • institutes of technology, and
  • other college level organizations (e.g. vocational and trade schools) that award academic degrees or professional certifications.

The EPCU began sending compliance check letters in April to a national sample of over 300 higher education organizations. These letters contain the following attachments:

  • Instructions;
  • Form 886-A, Explanation of Items - a compliance check containing 21 questions to help determine if employees have an effective opportunity to make salary deferrals;
  • Glossary - commonly used terms; and
  • 403(b) Informational Attachment #1 - a brief description of the 403(b) written program requirement and an example of the order in which excess salary deferral contributions are applied to a plan that permits both age 50 and 15-year catch-up contributions.

An organization’s failure to respond to the contact letter by providing the requested information could result in further action or examination of the plan.

Organizations that appear to comply with the universal availability rule will receive a closing letter. EPCU will follow up with organizations that appear non-compliant to help them analyze the problem and make necessary correction.

Organizations can self-correct their plan errors. Correction for a universal availability failure generally includes giving each excluded eligible employee the opportunity to participate. The organization must also make employer contributions to restore improperly excluded eligible employees’ lost opportunity to make salary deferrals. An organization’s failure to correct the error could result in the loss of favorable tax benefits for the plan and the employees.

We will report the finding from this project; describing responses and identifying areas where we can provide additional 403(b) guidance, education and outreach by:

  • providing information to help focus enforcement efforts to address and avoid non-compliance in 403(b) plans sponsored by higher education organizations, and
  • educating and encouraging voluntary compliance by giving organizations the chance to identify and self-correct problems with their plans.

Visit the EPCU Web page for more information on this and other projects.

Page Last Reviewed or Updated: 05-Mar-2014