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UPDATED: April 12, 2018 at 2:00 p.m.

The Republican tax overhaul passed in December may affect Harvard's pension investments and the University is currently “reviewing” the situation, according to a Harvard spokesperson.

Last December, Republican lawmakers passed tax legislation requiring private colleges with endowments greater than $500,000 per student to pay a 1.4 percent tax on annual endowment returns. Harvard numbers among the 35 institutions affected, and would have paid $43 million under the tax if the legislation had existed in fiscal year 2017.

The bill could potentially affect the University’s pension investments, which currently serve many retired Harvard affiliates as well as current employees hired before 2001. University spokesperson Vanessa McMillan wrote in a statement that the impact of the endowment tax on these pensions is still unclear.

“Harvard is aware there is concern that the net investment income tax could potentially apply to pension/retirement investments,” she wrote. “We are examining the issue and awaiting IRS guidance.”

In 2017, Harvard paid a total $64.7 million in pension and post-retirement health benefits and held $836 million in pension assets, according to the financial report for fiscal year 2017.

While the University has not provided defined benefit pension plans—which guarantee a certain amount of retirement income—since 2001, Harvard has since separated the pension plan investments from the University’s endowment investments. Instead, Harvard has established a trust separate from the endowment and worked with external financial organizations to manage pension investments.

University employees hired after 2001 participate in 403(b) retirement plans, a kind of defined contribution plan into which both employees and Harvard contribute financially. These plans do not form part of the University’s pension investments.

The management of pension funds is regulated by the federal government and the Department of Labor. Under the Employee Retirement Income Security Act which passed in 1974, employers like Harvard have a legal obligation to provide information to employees about their retirement plans and to manage those plans in the best interests of employees.

In 2008, Harvard Management Company—which manages the University’s $37.1 billion endowment—decided to invest pension plans separately from the endowment. Since employees depend on pension funds in retirement, pension plan investments are generally more conservative than the endowment investment.

In 2010, the University created a seven-member Defined Benefit Investment Committee which “is responsible for the evaluation, selection and maintenance of the investment funds held in the retirement plan trust,” according to McMillan. The current chair of the Committee is Thomas J. Hollister, the University’s chief financial officer.

Michael Beaver, a lawyer specializing in pension benefits, said the formation of a committee to manage pension investments is “not uncommon.” He added that Harvard’s shift from defined benefit pension plans to defined contributions is consistent with the trend across different companies.

“A certain amount of financial and investment uncertainty exists as well, so that private employers find it difficult to plan adequately for the future,” he said. “By shifting to defined contributions, it lowers some of the burdens and brings quite a bit of certainty to retirement plan costs.”

While Harvard Management Company still plays a “limited operational role” for the pension plan investments, the Investment Committee meets quarterly to make final decisions on investments. State Street—a Boston-based financial services company—serves as the custodian of the investments, according to McMillan.

In 2012, the University hired Willis Towers Watson—a multinational risk management company—to advise and partner with HMC to “support the Investment Committee on areas such as strategic portfolio construction.”

This article has been revised to reflect the following correction:

CORRECTION: April 12, 2018

A previous version of this article incorrectly indicated that the Republican tax overhaul passed in December may affect the pensions of Harvard employees hired before 2001. In fact, the tax will only affect Harvard's pension investments.

—Staff writer William L. Wang can be reached at william.wang@thecrimson.com. Follow him on Twitter @wlwang20.