Leaderboard

For two of several interpretations of a before-ERISA funding condition, consider: IRS Publication 778 (Feb. 1972), part 2(b); IRS General Counsel Memo. 36813 (Aug. 16, 1976). If a church plan has not elected to be ERISA-governed, ERISA’s remedies for causing an employer to fund a pension plan do not apply. Whatever tax law condition might apply might not motivate an employer to fund a plan. If a plan does not meet a condition for I.R.C. § 401(a) treatment, the IRS could apply Federal tax laws as if a plan is not a qualified plan. But the IRS might be reluctant to do so: Initiating an examination that relates to a church requires extra supervisory and executive approvals within the IRS. Developing proof that a plan is insufficiently funded such that it does not meet a condition of § 401(a) treatment under the Internal Revenue Code of 1954 as amended through September 1, 1974 involves unusual and burdensome work. Denying an employer an income tax deduction for contributions to a plan might have little or no practical effect on a church. Treating a plan as not tax-qualified might burden employees, retirees, and beneficiaries.

Under the Act, ROTH contributions must be fully vested. Just another delightfully administrative thing to track for Plans that allow employees to elect employer contributions be made as ROTH.

In the absence of any specific guidance, I do not think a plan administrator can be faulted for relying on the plain language of the law. My recollection is also that past disaster relief declarations have been for areas designated for individual assistance, but that does not appear to be the case for QDRDs.