For Profit Sub of 501c3

[austin3515]

The sub is NOT a wholly owned LLC.  It's a for-profit corporation.  What are the rules concerning whether or not they can adopt a 403(b) Plan sponsored by the parent?

[Belgarath]

NYET. Unless the sub meets one of the other definitions of eligible employer. See 1.403(b)-2(b)(8)(ii) - if my magic thumbs typed the citation correctly...

[Peter Gulia]

https://ecfr.federalregister.gov/current/title-26/chapter-I/subchapter-A/part-1/section-1.403(b)-2

[austin3515]

Eligible employer means -

(A) A State, but only with respect to an employee of the State performing services for a public school;

(B) A section 501(c)(3) organization with respect to any employee of the section 501(c)(3) organization;

 

So no then, because the employees here are not employed by the 501(c)(3) org.  Sounds like everyone agrees?

[Peter Gulia]

Concur.  A corporation other than a 501(c)(3) charity or for public schools cannot maintain a 403(b) plan, unless the corporation is an employer of a minister, and then only for the minister.

[Patricia Neal Jensen]

Agree.  Sub, as a for profit, cannot sponsor a 403(b).  Sub should adopt a 401(k).   Or the 501(c )(3) can terminate the 403(b) and adopt a 401(k) and then the Sub can also adopt the 401(k).  (Not recommending the latter but it would put them both in the same plan, if that goal is important.)