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Nonelecting (maybe) Church plan stops filing 5500. Problem?


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We have a church plan that was established way back in the 90's.  The initial plan document says the plan is "Not Subject to ERISA."

However, they've been filing 5500's throughout.

What's not clear is if they ever formally elected (as an attachment tot he 5500) to be subject to ERISA (or filed for a determination letter with that attachment).

So, what if they are not subject to ERISA?  Can they just stop filing 5500's and when the "where's your filing" letter comes just write back and say "we don't have to file b/c we aren't subject to ERISA"?

I understand that if they ever elected to be covered by ERISA that it's irrevocable.

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Yes.   They can do this and we have done this successfully.  I did write a letter for the client to send indicating that the Plan was a Non-Electing Church Plan and that the 5500's were filed in error.  Some where in my files, I have a copy of an IRS pub that says merely filing a 5500 does not constitute an election to be ERISA.  This rule is literal and narrow.  A Church plan cannot "accidentally" become ERISA.

PNJ

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   BG 5150:

   "DOL Advisory Opinion 85-32 determined that a church plan was non-electing despite the fact that a plan administrator had filed a 5500 for two years....

An election...can only be made by the plan administrator attaching a statement to either (1) the annual return (filed 5500),... or

(2) a written request for a determination letter relating to that specific plan.  The statement must state that the election is made under Code Section 410(d) and state the plan year for which it is effective."  (Treas. Reg. Sec. 1.410(d)-1-(c))

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What if no one remembers that an election was attached to the 5500 in, say, 2001?  And then they stop filing?

Do you think the IRS would still even have that election somewhere?  And if they did, would anyone ever be able to find it?

I have an image in my mind of the last scene of Raiders of the Lost Ark where they are wheeling the crate into the big warehouse.  I picture the election filed away in there.

 

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