15 year rule and a "qualified employer."

[katieinny]

Several medical practices have been set up that are affiliated with a local university. Some have 403(b) plans and are wondering if they can be considered a qualified employer (educational organization, hospital, etc.) for purposes of using the "15 year rule." Your thoughts would be appreciated.

[mbozek]

The 15 year rule is available only for employees of an eligible employer, e.g. hospital. There are very specific rules as to when a Dr can be considered an employee of a hospital. The drs need to retain tax counsel. I dont know who you mean by "they can be considered a qualified employer"

[katieinny]

The university teaches medicine and these medical practices are affiliated with the university. The practices are all 501©(3) organizations. So we're trying to determine if these practices, due to their not-for-profit status and their affilation with the university, can allow their employees to take advantage of the 15 year rule.

[mbozek]

The issue is whether the Drs c3 are part of a controlled or affiliated svc group with the univ. med school or hospital. This is a very complex area and needs the advice of counsel. See if counsel for the university will provide an answer.

[IRC401]

Aren't the MDs also on the payroll of the university, and doesn't the university have a 403(b) plan?

In any event, I agree that this is a very complex area, and it would be dangerous to rely on the advice on anyone who doesn't have all of the facts.

[gc@chimentowebb.com]

[several medical practices have been set up that are affiliated with a local university. Some have 403(b) plans and are wondering if they can be considered a qualified employer (educational organization, hospital, etc.) for purposes of using the "15 year rule." Your thoughts would be appreciated.]

I have a similar issue with a controlled hospital organization. If it were church-controlled, the answer is easy. All entities are covered and treated as one. By implication, that means each entity in a non-church group still has to be tested separately for "qualified organization" status under the 15 year rule.

However, there might be another way around this. I was surprised to see how broad the definition of "health and welfare service agency" is in the final regulation. It seems to cover any "organization" whose primary purpose is to provide medical care ("such as a hospice"). There is no limiter that this be a public entity. So a medical practice, a sub-acute facility, or other controlled entities related to the primary mission of a hospital or school could be considered a "qualified organization" for the 15 year rule.

Any comments?

[gc@chimentowebb.com]

[Your thoughts would be appreciated.]

I just re-read the preamble to the final regs. An employer which is part of a controlled group and includes a hospital or educational entity may elect to aggregate service for the special 15 year rule.

Here's the preamble cite:

"For a section 501©(3) organization that makes contributions to a section 403(b) plan, these

rules (controlled group) would be generally relevant for purposes of the nondiscrimination requirements, as well as for the section 415 contribution limitations, the special section 403(b) catchup

contributions, and the section 401(a)(9) minimum distribution rules."

George