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Church plans and nondiscrimination testing


katieinny
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I originally posted this question under the 403(b) heading, but then decided it should go here.

I've been studying sections 414(e) and 3121(w)(3) to determine if a seminary that sponsors a money purchase plan and a 403(b) plan is exempt from non-discrimination testing.

I've determined that the seminary's money purchase plan qualifies as a church plan and is exempt from nondiscrimination testing because 414(e) applies.

However, it seems that 403(b) plans use the section 3121(w)(3) definition so that plan would be subject to nondiscrimination testing.

First, I'm wondering if my thought process is on target; and

Second, I'm wondering if anyone else has experience with a plan or plans maintained by a seminary.

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  • 3 weeks later...
Guest Danny Miller
I originally posted this question under the 403(b) heading, but then decided it should go here.

I've been studying sections 414(e) and 3121(w)(3) to determine if a seminary that sponsors a money purchase plan and a 403(b) plan is exempt from non-discrimination testing.

I've determined that the seminary's money purchase plan qualifies as a church plan and is exempt from nondiscrimination testing because 414(e) applies.

However, it seems that 403(b) plans use the section 3121(w)(3) definition so that plan would be subject to nondiscrimination testing.

First, I'm wondering if my thought process is on target; and

Second, I'm wondering if anyone else has experience with a plan or plans maintained by a seminary.

We have researched this issue. The relevant legislative history in the Tax Reform Act of 1986 indicates that the "typical seminary" is treated as a "qualified church controlled organization" and thus is not subject to the 403(b)(12) nondiscrimination and coverage rules. In another place, the leg history uses the term "religious seminary." The reasoning behind this conclusion given in the leg history is that the "typical seminary" doesn't provide services or facilities to the general public. But, what if it does? What if it has an open admissions policy that permits anyone of any faith to attend, even if that person can't seek ordination within the affiliated denomination? Is the seminary then not a "typical seminary?" I think the leg history language should be intepreted so that a seminary that is affiliated with a particular denomination and is a seminary where most of the students present are seeking ordination within that denomination should be treated as a "typical seminary" for purposes of the nondiscrimination and coverage rule exemption. But what if the seminary is nondenominational? The difficulty here is that the "typical seminary" is treated as a qualified church controlled orginization, which sounds like some denominational relationship must be present for that status to be achieved. But that's another open question--and there are many of those in the church plan world. Hope this helps.

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  • 3 months later...

Danny: Thank you for your reply! I had given up after not getting a response within a few days, but happened to check today. We have continued to struggle with this issue all these weeks, looking for whatever tidbits of information we could find. At least this gives us something to go on.

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