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Feds Verify School Annuity Compliance

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The Internal Revenue Service is expanding a program to ensure that U.S. public schools are offering 403(b) retirement plans.

Federal law requires schools to make the ability to buy retirement annuities through 403(b) plans available to all public school employees who work more than 20 hours per week, including substitute teachers, janitors and nurses.

The IRS Employee Plans Compliance Unit has started sending compliance questionnaires to public school districts in all 50 states, officials say.

The new effort builds on a pilot project that the unit started in June 2006, by sending questionnaires to public schools and districts in Missouri, New Jersey and Washington.

IRS is starting the new, 50-state program by contacting school districts in Alaska, Florida, Hawaii, Illinois, Nevada, Pennsylvania, Tennessee and Virginia, officials say.

School districts in the other states will be contacted later this year and in 2008, officials say.

During the pilot project, the plans compliance unit found “fairly widespread noncompliance” with the universal availability requirement, according to Joseph Grant, director of the IRS Employee Plans Division.

The IRS believes most of the noncompliance was due to ignorance, Grant says.