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Employer contribution made for two terminated employees by mistake.


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Background: 403(b)(9) Non-electing Multiple-Employer Church Plan

A church mistakenly sent employer contributions to the plan for two terminated employees. This church did not intend to provide post-employment contributions and is asking the funds be returned. Generally, when the plan receives an employer contribution that is in amount higher than intended, it applies it to another employees(s) of the employer for a future contribution, but these were the church's only two employees in the plan. The church intends to hire someone, but timing is uncertain.

Can the funds be returned to the employer, or must they stay in the plan for a future contribution since the church intends to stay in the plan.

 

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Answering your query would require reading the complete set of the plan’s governing documents, might require considering a relevant State’s law, might require considering the church’s internal law, and might require considering other facts and circumstances.

Here’s a partial selection of a few points one might consider:

Is the plan an individual-account (defined-contribution) plan, or a defined-benefit plan?  (Unlike most other § 403(b) plans, church plans have some variations and transition rules that might allow a defined-benefit plan.)

If this is a multiple-employer plan, is the whole of the plan’s assets available to provide benefits to any employer’s participants and their beneficiaries?  Or is there a separate subplan for each employer?

What does the plan’s governing document say about whether a mistaken contribution remains in the plan’s assets, or is returned to the employer?

If the document provides a return of a mistaken contribution, do your facts fit the plan’s definition of what is treated as a mistaken contribution?

Are there other terms about an employer’s participation in the plan?

Perhaps more practically, what does the church plan’s administrator say on whether the employer may get a return?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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