Rev. Rul. 73-607

Advice has been requested whether, under the circumstances described below, the employees of the department of education of a State are performing services for an educational institution for the purposes of section 403(b) of the Internal Revenue Code of 1954.

A statute of the State provides that the employees of the department of education shall be appointed by the commissioner of education. That statute also provides that the department of education shall carry out the mandates, prohibitions, and regulations for which it is made responsible, and seek to assist local school districts in developing effective and improved programs of education through research and experimentation, consultation, conferences, and evaluation. In practice all programs, whether academic or vocational, as carried out through the public schools, are under the development and surveillance of the department of education. Academic and vocational curriculum guidance are also provided in great detail to the educational institutions for use in the classrooms. Furthermore, the staff develops and executes staff development programs within the school districts to further the efficiency of the classroom teacher in both the vocational and academic fields.

None of the janitorial, custodial, or general clerical employees under the department of education are required to be trained in, or have experience in, the field of education. However, such training or experience is required for all employees holding positions involving a significant degree of executive authority or policy making.

Section 403(b) of the Code provides for a limited exclusion from gross income if an annuity contract is purchased for an employee, who performs services for an educational institution, by an employer which is a State, a political subdivision of a State, or an agency or instrumentality of any one or more of the foregoing.

Section 1.403(b)-1(b)(5) of the Income Tax Regulations states that, for the purposes of section 403(b) of the Code, a person shall be considered an employee who performs services for an educational institution if he is performing services as an employee directly or indirectly for such an institution. An employee who performs services involving the operation or direction of a State's education program as carried on through educational institutions is an employee performing services indirectly for such institutions. However, a person occupying an elective or appointive public office is not an employee performing services for an educational institution unless such office is one to which an individual is elected or appointed only if he has received training, or is experienced, in the field of education. The term "public office" includes any elective or appointive office of a State, a political subdivision of a State, or an agency or instrumentality of any one or more of the foregoing. Thus, for example, a regent or trustee of a State university or a member of a board of education is not an employee performing services for an educational institution. On the other hand, a commissioner or superintendent of education will generally be considered an employee performing services for an educational institution.

The services of the department of education employees involve the operation or direction of the State's educational programs as carried out through the public schools. Thus, for example, for purposes of determining whether a person is an employee who performs services for an educational institution, there is no meaningful distinction between the clerical employees in a school and the clerical employees in the department of education.

An elective or appointive public office is one involving a significant degree of executive authority and policy making rather than ministerial authority and policy implementation. Under such definition the janitorial, custodial and general clerical employees of the department of education do not hold a public office within the meaning of section 1.403(b)-1(b)(5) of the regulations and, therefore, are considered to perform services indirectly for an educational institution. While the employees of the department of education who hold positions involving a significant degree of executive authority or policy making occupy appointive public offices, they are appointed only if they have received training, or are experienced in the field of education. Therefore, these individuals are also performing services indirectly for an educational institution for the purposes of section 1.403(b)-1(b)(5) of the regulations.

Accordingly, the employees of the department of education of this State are performing services for an educational institution for the purposes of section 403(b) of the Code.