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404 Deductibility Rule and Tax Exempt Sponsor?


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Plan Sponsor of 403(b) is a tax exempt org.  They want to make very large employer non-elective contributions.  The question is not about the individual limits that apply to participants.  The question is "does the Sec 404 deductibility rule apply to a plan sponsor who does not have tax deductions?"

PS... the Sponsor is actually a non-electing church.  Would the answer be different than a 501(c)(3) org.?

Thanks!

PNJ

Patricia Neal Jensen, JD

Vice President and Nonprofit Practice Leader

|Future Plan, an Ascensus Company

21031 Ventura Blvd., 12th Floor

Woodland Hills, CA 91364

E patricia.jensen@futureplan.com

P 949-325-6727

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In either case, the deductibility limits do not apply. 

Employee benefits legal resource site

The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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A citation isn't really possible, because we're talking about the absence of a statute, not the presence of one. The statute says you can't get a tax deduction for a contribution of more than $X. It doesn't say that there is an excise tax on contributions of more than that amount, or that your plan is disqualified, or that it's a violation of ERISA. 

So even if you were talking about a taxable employer, it could make contributions of more than $X. It just wouldn't get a tax deduction for them. So what possible penalty could there be in the case of an organization that doesn't get tax deductions in the first place? 

Employee benefits legal resource site

The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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