Based on compensation, years of service, and previous contributions, calculating the MEA can be a tricky endeavor. It's enough to give even the best math teachers fits. Moreover, ten employees took advantage of the catch-up provision who were ineligible to do so. Districts erroneously believe that the laissez-fair approach shields them from liability. In 1996, the IRS said that regardless of what you do, you have the responsibility.
Errors can be costly.
Even a single transaction that violates one of the IRS contribution rules could technically cause the entire plan to lose its status as tax-sheltered warned Neil Wolfson and Martha Priddy Patterson of the accounting firm KPMG in The Journal of Compensation and Benefits . Additional financial penalties were assessed by the state. IRS scrutiny will only increase. Mike Johnson, finance officer for the Howard Public Schools System in Maryland, believes school districts should heed this warning. Everything I've been reading says the IRS is taking a closer look at these plans.