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governmental parent with 501(c)(3) sub


waid10
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A hospital authority is a political subdivision and has formed a 501©(3) to employ physicians. Can the hospital authority establish a governmental plan and make that plan available to both employees of the parent (hospital authority) as well as employees of the sub?

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ERISA 3(32) defines a governmental plan to be a plan of a political subdivision of a state or of an "agency or instrumentality" of the political subdivision. The question is thus whether the 501c3 owned by the hospital authority is its agency or instrumentality.

See EBSA Advisory Opinion Letter No. 2003-16A for criteria looked at by the DoL in what is a facts-and-circumstances determination.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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I thought the question was whether or not the employees of the government unit could participate in the 403(b), even though the government unit is not eligible to sponsor a 403(b) plan. Are you saying that if the 501©(3) entity is an instrumentality, then that opens the door for the parent's employees?

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QDROphile, I think your question is a different one than the OP, which asked if the governmental employer's plan may be extended to the doctors employed by the 501c3 controlled by the governmental unit. Your question/comment is whether a 403b plan properly sponsored by a 501c3 could then be extended to employees of the governmental employer that controls the 501c3. I don't think so.

While the EBSA advisory opinion I cited gives analysis of when a 501c3 is sufficiently controlled by a governmental employer so that the 501c3 is itself considered governmental, I don't know of any authority that runs in the other direction. That is, I know of no authority that would suggest that because part of the governmental employer is in the form of a 501c3 all of the governmental employer is considered a 501c3.

A few years back, I became involved with a county-owned hospital that had for a time a separate corporate existence that was a 501c3 controlled by the county. While the hospital was a 501c3, it established a 403b for the hospital employees. A few years after that the county terminated the separate corporate existence of the 501c3 hospital, rendering the hospital to be a 'department' of the county government like the road and bridge crew and sheriff's deputies are. But the 403b plan was continued. Many years later when the problem of possible ineligible employer for 403b sponsorship was discovered, we contacted Bob Architect of the IRS and he was of the opinion that the hospital became an ineligible employer with regards to the 403b program. We rectified that through an informal VCP-like process in 2004.

While this ineligible employer situation occurred when there was no 501c3 at all--and your question is whether concurrently with the 501c3's existence the other governmental employees could benefit under a 403b--I think the ineligible situation I've related points up how the IRS Nat'l Office views matters. Only while a 501c3 could the hospital be an eligible employer for 403b purposes. I would suspect since there was no 'grandfathering' of that aspect afterwards, even though the 403b plan was proper when set up, the IRS would not view it proper for employees of the governmental unit outside of the 501c3 entity could have a 403b.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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Oh, contrare! Your question, QDROphile, was as good a one as the OP, just a different one.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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