404 Deductibility Rule and Tax Exempt Sponsor?

[Patricia Neal Jensen]

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

[Carol V. Calhoun]

In either case, the deductibility limits do not apply. 

[QP_Guy]

Carol a citation for that would be super helpful.  

[Carol V. Calhoun]

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? 

[Patricia Neal Jensen]

Thank you!

Patricia