Patricia Neal Jensen

All the above is good advice. I would emphasize that a Hardship withdrawal has immediate and negative tax consequences (again ignoring the COVID19 rules). You will be taxed and penalized for the amount of the Hardship and in some states you will also pay a state penalty in addition to the state tax and the federal tax and penalty. I often tell Participants who ask, that they will "lose" around 60% of the amount to taxes and penalties in a Hardship withdrawal situation. Loans are much better. You would normally not have to give a reason for a loan (some plans require this but not all) and it is not taxable when you take the money out of the plan. You will only pay taxes and penalties if you default. IRS.gov/newsroom/relief- for- taxpayers-affected-by-Covid-19-who -take-distributions-or-loans-from retirement- plans will take you to an IRS News site that has fairly readable information on such distributions if they relate to the application of the new Covid19 rules. It will help you understand what we are referencing and may make a good copy to take with you when you talk to your HR person. The best of luck to you.

BG 5150: "DOL Advisory Opinion 85-32 determined that a church plan was non-electing despite the fact that a plan administrator had filed a 5500 for two years.... An election...can only be made by the plan administrator attaching a statement to either (1) the annual return (filed 5500),... or (2) a written request for a determination letter relating to that specific plan. The statement must state that the election is made under Code Section 410(d) and state the plan year for which it is effective." (Treas. Reg. Sec. 1.410(d)-1-(c))

I note QDROphile's comments above but cannot personally imagine why they would do this. Most of our church plans have discriminatory contribution formulas for pastors, etc which would not pass testing if they had to comply with ERISA. Also the use of a waiting period for deferral eligibility can be very useful and important. Finally, many of these plans exclude classes of employees for whom coverage would be required if the plan was ERISA. I do think all church plans should have plan documents (although not all are required to do so). The document is the "contract" with the participants and it is wise to have that in writing and an SPD to deliver. It also provides some guidance and evidence of structure in a state where there are state fiduciary requirements for Non-ERISA plans (California). PNJ

Yes. They can do this and we have done this successfully. I did write a letter for the client to send indicating that the Plan was a Non-Electing Church Plan and that the 5500's were filed in error. Some where in my files, I have a copy of an IRS pub that says merely filing a 5500 does not constitute an election to be ERISA. This rule is literal and narrow. A Church plan cannot "accidentally" become ERISA. PNJ

I would eliminate the age requirement. Having an age as low as 14 invites an auditor to ask for proof that this child actually works there. Why raise this issue?

Choice of a vendor or a secure place to timely deposit this money is the plan sponsor's responsibility. Setting up all the details of this conversion should have included this issue. The vendor is pushing your client around because no one went over this with them when the deal was done (before they were hired). PNJ

I work in 403(b) almost exclusively and really appreciate them. I have never worked with Service Support as fast or as good as theirs. I don't remember the document issue but time was of the essence and I was discussing this with a colleague at QBI who uses another vendor for 401(k) documents. I told her I would ask FTW and get back to her that afternoon. She said something to the effect of "You won't hear back by then!" I replied that I would and did!

Agree with you and Bill Presson. BTW, Non-Electing Church 403(b) plans are different than Non-ERISA 403(b) plans. If you accept this client, and are sure it is a "church," be sure to use a plan document format intended for church plans and not one intended only for a Non-ERISA 403(b) sponsored by a NonProfit which is not a church. A good thing to check would be a provision for employer contributions. Non-Electing (which translates into Non-ERISA) Church plan documents have employer contribution provisions in them and a document for a NonProfit sponsoring a Non-ERISA 403(b) does not contain employer contribution options. Have a great day! PNJ

Good article and useful information. Full termination is covered in our documents but not partial. At least not in the 403(b) documents we use. It references the applicable law so you are back where you started. Almost all of our 403(b) plans use 100% vesting for all employer contributions, though.

If it does not say, they can change/ re-enter anytime, amend the plan so that it does! The fact is, we have found, that participants don't do this as often when they know they can do it whenever.

Many suggest "dollar cost averaging" your contributions. This means putting 1/12th (or something like that) each month. This minimizes the risk that you put the entire year's contribution in the account at the highest point in the stock market that year. If you ever work for an employer who has a qualified plan (401(k) or 403(b)) and it has an employer matching contribution, contribute to that plan with a contribution sufficiently high enough to get all the matching available. Good luck!

Greetings! I have "feelers" out to all my attorney friends and some significant 403(b) vendors, etc. I am starting to get such plans in and would love to be able to tell them that this is going to be cheaper than $3,000! (over $500,000 in assets is not a very big plan for many of these). No one has yet heard of a program for reducing these fees for 403(b) plans in these situations. One such attorney said to put them on the Pre-Approved Document right away... that it cannot hurt. I will post on here if/ when I hear anything helpful. PNJ

Exclude HCE's from the 401(k). Easy Peasy.

And no audit. The audit is "caused" by filing a long form 5500. No 5500; no audit. I also agree with BenefitsPerson. I have followed that procedure for Non-Electing Church plans which had filed 5500's for years before they hired us. Filing a 5500 does not make a church plan an "electing" church plan. I would be careful about whether a school (Christian or otherwise) qualifies as a "church" or QCCO. We require that the organization furnish us a copy of whatever they have obtained from an attorney or whoever made this determination and we also make it clear to them that we did not and will not make such determinations.

A Non-Electing Church plan is not ERISA. Eligibility such as you mention is fine. Some of these plans cover only ordained clergy.

Your employer is doing this correctly. This is NOT an employer plan contribution. This is technically an employee contribution and so should be run through payroll and deferred for income taxes but not other payroll taxes (FICA, Medicare etc). This is not contingent on a decision by you about making deferrals. If you don't make deferrals, you simply have more taxable income than you did before this transaction.

Thank you, Carol! It is a pleasure to have your contribution. PNJ

One other item: It is not permissible for the Plan Sponsor of a Non-ERISA plan to hire a TPA to exercise the impermissible discretion.

If possible, I advise Non-ERISA plans for which I am doing the documents and our firm is doing whatever administration or consulting is involved, not to have Hardships or Loans unless they are using a vendor like TIAA where the vendor will assume the responsibility of resolving such questions with the Participant without the Plan Sponsor's participation. It is my understanding the the Sponsor can answer factual questions (such as "Is this person an employee?" "What is the person's hire date? Birth date?") The prohibition relates to questions involving a judgment or fiduciary action (Does this Participant have a Hardship? Is this person creditworthy for a loan?) I agree with Carol (good judgment on my part!!). I also note that Non-ERISA plans are a slippery slope. The IRS and DOL would prefer all 403(b)'s to be ERISA so no favors or leeway is given to plans purporting to not be subject to ERISA. For an excellent discussion of this see Bob Toth's comments in "The Business of Benefits", January 30, 2014, "Trouble Ahead for the Non-ERISA 403(b) Plan." In this article, he discusses a lawsuit the DOL filed against a plan sponsor for late deposits (these were really late...months not days). The DOL maintained that the Plan Sponsor exercised discretion over the plan assets by late depositing them and that exercise of discretion made the plan ERISA. Finally, most of the clients we advise in this space (and their advisors) believe that if the plan does not permit Employer contributions, that plan is Non-ERISA. As everyone responding in this space knows, it is not in any way so simple. We also work with many plans for which the day to day matters at the employer's work place are handled by a modestly paid person who is also doing a lot of other HR and related tasks. These jobs also have higher turnover. If a Plan has loans in it, and the vendor asks the Plan Sponsor for a signature, the person I just described may just sign off on paperwork without consulting us.

Good morning! Have not found or heard anything about a "special program." An ERISA attorney we respect says "...adopt a Pre-Approved document now. It can't hurt and may help."

Just one additional reminder.... Look at the plan document. PNJ

My sources tell me that a Housing Allowance is not reported by the Church to the IRS in any format. Housing Allowance is subject to self-employment tax but not income tax. Be sure there is a Board Resolution supporting the Housing Allowance. IRS.gov/faqs/ ...ministers-compensation-housing-allowance.

Thanks to both/ all of you. I sent the material we have found to the Consultant. She will recommend that they take the withdrawal from the 403(b) and get advice from their attorney if they still want to explore a CARES Act distribution from the 401(a) plan. The attorney also wrote the 401(a) plan so I leave the issue of a governmental sponsor to him as well. Thanks!

"FICA Alternative" is what I am told this plan is.... "A FICA Alternative Plan is a type of 3121 retirement plan for your seasonal, part-time, and temporary employees that replaces Social Security. Employers avoid the matching 6.2% Social Security contribution, replacing it with an impactful benefit for employees. What is a FICA replacement plan? A "public retirement system (sometimes referred as a "FICA replacement system or plan) is a pension plan maintained by a public employer that meets the requirements of Internal Revenue Code 3121(b)(7)(F). These requirements must be met as an alternative to mandatory social security coverage."

Larry... Not a governmental plan. And thank you, Luke and Peter. Just as uncertain as I thought it was! PNJ