John Feldt ERPA CPC QPA

If this is truly a church plan, then the universal availability requirement is not a requirement. Thus, the one administrative assistant does not need to receive a contribution - the administrative assistant can be excluded. Also, if the plan only allows investments in annuities and/or mutual funds, then they do not have to get a plan document done like everyone else does (to comply with the Final 403(b) Regulations). That might save you some costs there.

Under §1.403(b)-2(b) Definitions: (5) Church means a church as defined in section 3121(w)(3)(A) and a qualified church-controlled organization as defined in section 3121(w)(3)(B). (6) Church-related organization means a church or a convention or association of churches, including an organization described in section 414(e)(3)(A). From that, we look up IRC 3121(w)(3): (A) For purposes of this subsection, the term "church" means a church, a convention or association of churches, or an elementary or secondary school which is controlled, operated, or principally supported by a church or by a convention or association of churches. (B) For purposes of this subsection, the term "qualified church-controlled organization" means any church-controlled tax-exempt organization described in section 501©(3), other than an organization which --(i) offers goods, services, or facilities for sale, other than on an incidental basis, to the general public, other than goods, services, or facilities which are sold at a nominal charge which is substantially less than the cost of providing such goods, services, or facilities; and (ii) normally receives more than 25 percent of its support from either (I) governmental sources, or (II) receipts from admissions, sales of merchandise, performance of services, or furnishing of facilities, in activities which are not unrelated trades or businesses, or both. Then, under IRC 414(e)(3)(A) A plan established and maintained for its employees (or their beneficiaries) by a church or by a convention or association of churches includes a plan maintained by an organization, whether a civil law corporation or otherwise, the principal purpose or function of which is the administration or funding of a plan or program for the provision of retirement benefits or welfare benefits, or both, for the employees of a church or a convention or association of churches, if such organization is controlled by or associated with a church or a convention or association of churches. Also, be sure to look at the Treasury Regulations: 1.414(e)(1). This will get you started.

Thanks, that memo is actually the reason for posting this question. This situation appears to be okay, based on the specifics for this client.

Is it truly a multiemployer plan? If one of the many employers no longer uses these union employees, but the other employers are still providing work for them, then the cessation of that one employer in and of itself would likely not constitute a distributable event. In that sense, it may help to understand this (in concept only) by thinking of the union as if they were the employer.

You're right, I did not exactly state exactly how many total HCEs and NHCEs exist. However, I indicated that all of the owners are getting 20% of pay.

I agree. With a newly revised written plan requirement deadline coming up soon anyway, perhaps it can be incorporated all into the new written plan, there is no need to adopt a separate 415 amendment.

Who is the Employer? A government? Are they a church-controlled college? Or a non-profit? Government plans and church plans are not tested for discrimination of employer contributions.

I'm not sure I read the proposed regs that way. The wording appears to state that the DOL cannot question the timeliness of your (small plan) deposit if you got the money into the plan by the 7th business day following the date it was withheld from pay. Thus, if you deposit later than the 7th day, you then fall under the normal rules of: ASAP, which cannot be later than the 15th business day of the following month. The DOL, upon examination, could question a deposit made after that 7th business day, but the proposed regs do not appear to say it is automatically late. Thus, if you deposit on the tenth business day because your accountant left the company, you may have facts and circumstances that the DOL might accept (maybe).

Okay, that's what I suspected. Now I'm convinced. As for prototype, we plan to only use volume submitter documents going forward (with EGTRRA documents), there's no longer any advantages for using prototypes anymore (as far as I know).

Reviewing a single DC plan (not a combo) that has each person is their own class. The plan covers everyone (it passes 410(b) using the ratio percentage test: over 70% covered). The valuation shows the owners maxing out (20%). The NHCEs look like this: 2 NHCEs get 9% of pay profit sharing another NHCE gets 49% of pay profit sharing all other NHCEs get the 5% gateway The 401(a)(4) test reveals a result of 70.01% (thanks mainly to the one NHCE whose ebar makes up more than half of the sum of the NHCE ebars). Each of the general test percentages are above the safe harbor percentage, except one class: which is above the midpoint, but below the safe harbor percentage. The one NHCE getting 49% is the youngest and this was their first year in the plan. They are not the very lowest paid of all eligibles (third lowest), but no one else in the plan has less service than they do. The average NHCE in the plan has seven years. Is it a problem that the this one NHCE employee is getting a 49% of pay allocation?

DC plan or DB plan?

If these rehires are only part-timers, then I'm going beyond my expertise when I now suggest that they discuss with their CPA the option of considering such rehires as independent contractors instead of employees, so please don't quote me on that idea. If they are full-time, then they really have to refer to their current employment requirements, one of which states that 5% must be withheld from pay to go into the plan. They could change the mandatory deferral to voluntary, and just match dollar for dollar on deferrals up to 5% of pay (that might save the employer some money too, if some now choose to defer under 5%). Is there a union contract preventing that option?

In 411? IMHO, I do not agree that the provision is only protected for those who are already 45, but that it is protected on a broader scale. I think any existing account balance (or benefits accrued) before the amendment is executed (or is effective, if later) can grow into this in-service distribution option. For example, someone age 30 with 24 months of service has a $2,000 balance. That balance has certain distribution rights attached to it. If the participant ever attains those necessary conditions which were riding along with that balance, then I believe those distribution rights also apply to that balance. When they turn 45, then that portion of their balance should be eligible for the in-service. That's my approach anyway, FWIW.

FWIW, I agree that you are not required to offer annuities as an optional form of payment.

Agreed.

(that is, participation is not required, but if you choose to participate, you must defer 5%). I thought mandatory was a condition of employment, where the employee cannot choose whether or not to participate.

I hesitate to disagree with BNA, but I see not their argument. Did they provide a citation for it? Maybe they are confusing T.R. §1.403(b)-3(b)(3)(iii) which tells me that church plans using retirement income accounts must have to have a written plan, but church plans NOT using retirement income accounts have no written plan requirement? The instructions to Form 5500 tell us that government 403(b) plans and church 403(b) plans that are not "employee benefit plans" under Title I of ERISA are exempt from filing. Remember of course, if the "church" 403(b) plan primarily covers employees of an unrelated trade or business of the church, then the ERISA exemption won't apply. Under Code §410(d), a church plan may elect to apply funding, participation, and vesting rules from ERISA, which then subjects the plan to ERISA Title I. Such an election is irrevocable. To me, this means that the "sponsor" of a true "church" 403(b) plan could volunteer to subject themselves to ERISA permanently, and doing so would require the 5500 reporting.

Just a note regarding the 5% deferral: Unless this is a church plan, the universal availability requirement allows a minimum of $200 for deferrals, meaning you can reject an annual deferral that would not hit the $200 mark. Thus, I am thinking that a 5% minimum possibly violates the universal availability requirement. FWIW.

If that definition passes 414(s) and your document allows you to do so. Be sure to look in the plan document, which spells that out, probably something in the 401(k) /(m) section, something like Safe Harbor Compensation "the Employer must apply a nondiscriminatory definition of Compensation..." edit: typo

Perhaps if you had a document staff of 3 and you had 1000 DC plans to restate, then you may rush.

Ditto.

Yes master, now I see clearly.

Yep.

Of course, if you are talking about a 403(b) plan, and assuming you were only referring to the employer contributions, not the deferrals, then as Bob Architect (of the IRS) indicates, and I quote "... it is the belief that this plan could be a subject of a number of items either stapled together or held together by a big paperclip." So, just use a big binder clip, maybe add a sticker that says it is meant as a big paperclip (just in case) - and be sure to let us know how well received that is by the IRS folks.

I'll have to fix my audio, I can't hear anything.