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403(b) Church Plan

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We are trying to understand the ins and outs of Church Plans and have been unable to find any real guidance. We are making a proposal to a group that encompasses several churches. They would like to set up two plans 1) for clergy and 2) for lay persons. The Clergy Plan would receive a 15% across the board employer contribution and the Lay plan would have either a profit sharing or a matching arrangement at the discretion of each individual parish.

Could someone tell me if:

1) They would be subject to ADP/ACP or discrimination testing, 415 limits, etc.

2) Would HC's be restricted in how much they could defer as opposed to the NHCE in the either plan.

3)Compensation of clergy includes not only salary, but housing & car allowance, schooling etc., What are the guidelines for compensation consideration in a Church Plan.

4) Will a Form 5500 be required since there will be employer contributions.

And, lastly is there a good information site that will help us understanding how church plans work and what is required.


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403(b) church plans are not subject to non discrimination and ADP/ACP testing. They are subject to 415 limits and limits on employee salary reduction. Church plans are exempt from 5500 filing unless they elect to be subject to ERISA. You need to consult tax counsel for the answer of what can be counted as compensation


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Guest LVanSteeter

If the Church 403b elects to be subject to ERISA, the Form 5500 filing is extremely limited and includes just the Form 5500, about 8 questions.

No other Schedules are attached.

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Forgive me for maybe asking a stupid question, but why would a Church Plan elect to be subject to ERISA?

The assets will be both participant and employer directed does that make a difference?

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