Officials are not sure if the retirement plan has been running in compliance with IRS regulations.
By HAROLD GWIN
VINDICATOR SHARON BUREAU
SHARON, Pa. -- The Sharon City School District is considering hiring an outside company to oversee the 403b retirement plan it has set up for employees.
The district makes no contribution to the plan but offers it at no cost to employees who want to save and invest money from their paychecks on a regular basis.
The Internal Revenue Service never monitored the 403b plans of nonprofit entities before 1994, but has now begun auditing those accounts across the country, James Wolf, Sharon's business manager, told the school board at a workshop this week.
Many of them have turned out not to be in compliance with IRS regulations and, which proved costly to plan holders, Wolf said, noting the University of Michigan has had to pay $60 million in back taxes on money its employees put into its plan because the plan wasn't run in accordance with federal guidelines.
The IRS doesn't go after the plan participants but makes the plan holder, in this case the Sharon City School District, responsible for any errors in operation, Wolf said.
First audit: The first Pennsylvania school district to be checked by the IRS, Radnor School District outside Philadelphia, recently underwent an IRS audit. The results aren't yet known, he said.
It is not clear how much money has been channeled through Sharon's plan over the past couple of decades but it could involve millions of dollars, Wolf said. About 130 district employees are plan members, he said.
The school district withholds the money from employee paychecks but then turns it over to investment companies designated by the employees, he said.
No one knows if those companies have followed IRS rules, or even if those who retired years ago began taking money out of the fund by the age of 701/2 as the IRS requires, Wolf said, noting Sharon retirees are scattered across the country.
Investigating: He proposed the school board hire Horizon Benefits of Cleveland to examine the fund, do the legwork to find out if it is in full compliance with IRS rules and then monitor it annually.
The company will do the job for a first-year cost of $6,320 followed by an annual cost of 50 cents per employee per month -- about $1,500 a year, Wolf said. The company would want a three-year contract, he said.
School directors seemed interested in the plan and Atty. Mark Longietti, board solicitor, will review Horizon's proposed contract. The board could vote on the issue Monday.