Patricia Neal Jensen

I agree with everything Peter noted above. Non-ERISA 403(b) plans are not "favored" in the law: A mistake in "administering" such a plan may cause the plan to not only be ERISA in the current year but also in years past resulting in failure to file 5500 penalties, etc. Below is a little "cheat Sheet" I show to entities considering starting a Non-ERISA 403(b): The listed activities are considered non-ministerial and therefore not permitted under the safe harbor for a Non-ERISA 403(b) Plan in accordance with DOL FABs 2007-02 and 2010-01: 1. Authorizing plan-to-plan transfers 2. Processing or authorizing distributions 3. Satisfying applicable qualified joint and survivor annuity requirements 4.Making hardship determinations 5. Selecting optional plan features 6. Determining and qualifying domestic relations orders 7. Determining loan eligibility and enforcement 8. Negotiating with annuity providers to change the terms of their products or other purposes, e.g, setting conditions for hardship withdrawals 9.Selecting a TPA to perform such administrative functions on behalf of the plan. Patricia Neal Jensen, JD, 403(b) SME FuturePlan Patricia.Jensen@FuturePlan.com

LTPT Rules "trump" the Exclusion. We have been trying to discourage the use of the 20 hour (or 1000 hour) exclusions because the recordkeeping etc on this is a challenge. The Sponsor will have to track the hours for application of the LTPT rules back for the time period required (2 years for 403(b)) and permit any employee who qualifies to defer. The LTPT rule itself only requires application for deferrals, but your document should also request a choice regarding any employer contributions. In other words, application of the employer contribution is not required by the LTPT rules.

ASC Seminar is today...

No special exemption for 403(b) and, as has been mentioned earlier, the problem is with the SIMPLE IRA. They could ask the party responsible for the SIMPLE IRA if their establishing documents have some sort of exemption from this rule for churches. (I have never heard of one but I am not any sort of expert about SIMPLE IRA's.)

I agree, Emily S. My experience is that SHNE is used when the sponsor wants all eligible employees to receive a contribution, regardless of whether or not they can or wish to save their own money.

Yes. Again, check available document language but the rules concerning this contribution type are the same in 403(b) as they are in 401(k).

I am not commenting on the 5500 question, but there are specific rules about the contribution which must be made by the plan sponsor which failed to implement the Participant's directive. SECURE 2.0 expands self-correction with regard to this oversight as well as others. I suggest working with a TPA or attorney who can guide you with regard to the proper procedure.

There may be more current info from the IRS, but the last I looked at this, there was some controversy concerning a requirement to add auto enrollment to a Safe Harbor Non-ERISA plan (as opposed to a Non-Electing Church plan which is by law, not ERISA and, also, clearly exempt from the SECURE 2.0 Auto Enrollment procedures and rules) . The initial assumption was that there was no exception for a Safe Harbor Non-ERISA plan but those of us who work in this area pointed out that the auto enroll provisions could cause the sponsor to assert a level of control which could make the plan ERISA. A recent ASC broadcast reiterated this concern. There may be, further, some state law considerations: A Non-ERISA plan is subject to state law and there are states which still have auto enrollment prohibitions. Except for any Non-Electing Church plans which you may have, I would set aside these Safe Harbor Non-ERISA plans and keep looking for more clarity on this point as the Cycle 2 403(b) pre-approved documents come out and become available for use.

Have worked with a plan which was under audit by the IRS. They applied the methodology articulated by WCC above. No mercy for large plan filers!

Agree with Bill Presson. Only 501(c)(3) orgs can adopt a 403(b) plan. A payroll for a 403(b) plan would mean that the "employer paying the payroll" (sponsoring the plan) is 501(c)(3). And it is correct that a 403(b) and a 401(k) cannot be merged under current law.

Re: ERISA 403(b) Plans: We are still using the 20 hour exclusion for deferrals etc. when the sponsor requests, but informing the sponsor that it will be "overridden" by the LTPT rules. It can be complex and messy. We do discourage the use of the 20 hour exclusion because of LTPT but this argument is not acceptable to all sponsors who want to use it. I know of no ruling that invalidates use of the 20 hour exclusion in the plan document.

Peter Gulia is, of course, correct that this is an issue of control (usually analyzed as Board Control) not "ownership." Almost all Churches, when adopting a 403(b) plan are adopting a Non-ERISA plan. A Church would need to elect an ERISA status for this to be otherwise (ERISA). I am also assuming for this discussion that the newly controlled entity is not itself a church. I suggest reviewing the "Type of entity" section in your pre-approved 403(b) Adoption Agreement under "Churches and Church-Related Organizations." Hopefully, the "acquired" organization is a church-controlled, tax-exempt 501(c)(3) organization. For your information, I suggest review of "QCCO vs Non-QCCO" published by Servant Solutions, a bundled church plan provider. (A clear, brief discussion of church controlled 501(c)(3) organizations). The primary determination of the difference between the two is revenue source. Both a QCCO and a Non-QCCO can participate in a Church 403(b) plan (Non-ERISA), but because Non-QCCO's must also comply with the universal availability requirement (applicable to 403(b) plans but not to Church 403(b) plans) and the DOL rules in 401(a)(4) and 401(m) and 410(b) (also inapplicable to Church 403(b) plans), you may have administrative challenges if you put a Non-QCCO in the Church's plan. Hopefully the plan adopted by the Non-Electing Church in question is a 403(b). (If it is a 401(k), the problem is much more difficult and rare.) I make no comment about the securities law discussion above. I also agree that a TPA could be at risk by determining the QCCO or Non-QCCO status. Our firm would usually ask for an attorney's letter or, at a minimum, a waiver of responsibility for this determination, if made by a third party.

I am not quite sure what vesting has to do with this, since vesting accrues when an employee has 1000 hours in a plan year. And I would assume that you are talking about a NonElective employer contribution and not matching. The plan could use "last day" as a requirement and only be obligated to contribute for employees employed on the last day of the plan year. I do not think the requirement the employer seems to be designing could be done in a pre-approved plan document.

Church sponsoring a plan should use 403(b). A church sponsoring a 401(k) must apply non-discrimination rules ADP, ACP and top-heavy testing) and pre-ERISA coverage rules; church sponsored 403(b) plans are not so required. See the article by Barry Salkin, the Wagner Law Group in Lexis Practice Advisor for the "Special Rules that Apply to 403(b) Church Plans" on pages 11, 12 and 13. The Exemption from Auto Enrollment in SECURE 2.0 simply says "church plans." While this exemption may also include 401(k) plans sponsored by a church (must be 501(c)(3)), the rules currently available are unclear on whether this includes 401(k) plans.

Good advice above. I absolutely agree with obtaining an election from every employee, including elections for "0". In 403(b) we have universal availability which can (does) require proof of having informed an eligible employee, but good advice for 401(k), too. What if this employee had come back and claimed that she never received the information or the form?

I agree with the comments above but have to ask "why" are you trying to reconcile the numbers on these forms? If I see a discrepancy in a significant number on something that matters to the 403(b) (number of employees listed as 800 on the 990 but we have been told there were 10 when the proposal was issued), I ask the sponsor to explain.

Surprised me but I looked and looked and could not find anything! Will keep trying. Seems like it ought not to apply but not safe to assume! Could freeze plan # 1 and set that up so no payouts; create plan # 2 and then merge the plans.

The obvious problem is or will be required amendments and restatements. With SECURE 2.0, many of these amendments are required and/ or necessary now. I would also check and see what the prior document provider says about document maintenance. Most will not maintain a document in this situation. It is very difficult to find a TPA who will do document only. It is not generally profitable for them. I/we have a relationship with an LA ERISA attorney who will do this. She uses ASC documents and her pricing is very reasonable. Please send me a note at Patricia.Jensen@FuturePlan.com and I will send you her contact information.

Why would a church plan use a 457(b)? Or (f)? There are useful opportunities to select the group covered in a church 403(b) since these plans are exempt from Title 1.

No Top Heavy in 403(b). No deferral testing in 403(b). LTPT applies to deferral rules. It is still possible to use a 20 hour (or another) exclusion category for an employer contribution. 403(b) plans are fortunate with regard to LTPT.

When just out of law school and the only entity who hired women was the IRS who did hire me, we were soundly instructed to look at the law, not at the instructions to forms. Still a good rule to remember.

Have had similar experiences with TIAA Annuity contracts. "Rev. Rule 2011-7 was issued to provide that a 403(b) plan meets the distribution requirements upon plan termination through the delivery to participants of a fully paid individual annuity contract..." (Groom Law Group "IRS Provides More Detail on Terminating 403(b) Plans" Nov. 19, 2020). Plan Sponsor "Ask the Experts" of January 16, 2024 indicates that a "fully paid individual annuity contract" means that the contract exists outside of the plan, in effect that the liability for the contract has been transferred to the annuity provider. The contract(s) still exist but the responsibility for the benefit and terms of the annuity contract now rest with the annuity provider and not with the plan. "Fully Paid" means that the Participants account balance has fully funded the contract; no future payments are required in order that the Participant receive benefits. In my experience with TIAA and 403(b) plans, it is clear that these requirements are met in the circumstance you describe. It is also true that TIAA will continue to carry the records for these contracts in the manner you describe. In other words, I think the requirement has been met. You can, of course, ask TIAA to list the contracts on a report without the plan sponsor's name but I have not had any luck with this and do not think it is actually required.

Also, for 403(b), try to avoid the 20 hour exclusion and all qualify for deferrals without regard to hours counting due to Universal Availability.

And it changes the vesting schedule for these LTPT folks!

Try Lee Swerdlin at FuturePlan (Lee.Swerdlin@futureplan.com). I am the SME for 403(b) work at FuturePlan and all our 457(b) work goes to Lee. Patricia Neal Jensen, JD SME NonProfit Plans FuturePlan, an Ascensus Company