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403(b)(9) Administration Questions


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Thanks in advance for any guidance that can be offered on my questions. We have our first 403(b)(9) church plan with discretionary profit sharing that is allocated at a rate of 12% of comp per year.  Is there any type of testing required? I know that because it's a 403(b), there's no ADP test and that Section 403(b)'s maintained by churches are not subject to the coverage and nondiscrimination testing rules and that it also isn't subject to the universal availability rule. However, I'm a little uncomfortable saying that NO TESTING needs to be done and I'm wondering if we should be testing comp limits, employer contributions, and for minimum contributions or if we have to test the profit sharing contribution at all. 

A few other questions I'm getting stuck on: do forfeitures need to be separately accounted for by person? Can church plans utilize auto-rollovers or cash out provisions? 

 

Thank you again to anyone with input :) 

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About your question on nondiscrimination:

Internal Revenue Code of 1986 (26 U.S.C.) § 403(b)(1)(D) sets § 403(b)(12) as a condition for § 403(b) tax treatment “except in the case of a contract purchased by a church[.]”

https://uscode.house.gov/view.xhtml?req=(title:26%20section:403%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section403)&f=treesort&edition=prelim&num=0&jumpTo=true

The rule follows the statute.

26 C.F.R. § 1.403(b)-5(d):

Church plans exception.  This section [26 C.F.R. § 1.403(b)-5] does not apply to a section 403(b) contract purchased by a church (as defined in § 1.403(b)-2).

https://ecfr.federalregister.gov/current/title-26/chapter-I/subchapter-A/part-1/section-1.403(b)-5

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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In addition to Peter's references, now that you are in the 403(b)(9) Church plan business, ask your firm to purchase reference materials for possible future issues.  The ERISA Outline Book, ERISApedia, or the NTSA publication "The Source for 403(b) and 457(b) Plans" are all excellent research tools.

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And my coauthors' work in 403(b) Answer Book (Wolters Kluwer).

For guidance on how a church plan or retirement income account might use wider investment opportunities than are allowed for other 403(b)s, it's in my Investments chapter.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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403(b) Answer Book also is available in an Internet-accessed database.  Most readers prefer the hyperlink navigation over thumbing through a book.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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No worries.  Ordinarily, I don’t mention my books.  I feel the publishers ought to pay the Bakers for advertising.  But once other sources were mentioned, it seemed helpful to mention 403(b) Answer Book, which includes a chapter dedicated on church plans.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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