Eligible Rollover Distributions and Church Plans

[Guest Mark Draa]

I have DB plan that I believe is a "Church Plan" for both US-based and overseas-based missionaries. I believe that all participants are US citizens. The mission pays their wages, but only withholds taxes for the US-based missionaries.

I can't tell yet whether the plan is an "electing" or "non-electing" church plan w/re participation/vesting/funding, etc. I believe that they are acting as if they are "electing" but I don't know whether or not they have "elected" :-)

Ok, so the question here is whether distributions under this plan are subject to the 20% mandatory withholding rules, the elective withholding rules (10% unless elected otherwise), or neither set of rules.

The mission also has a 403(b) plan where the vendor is applying the mandatory (20%) rules, fwiw.

In the current Pension Answer Book, there is a sentence in question 35:33 (dealing with TSAs for church employees) that says

"In the case of foreign missionaries, amounts contributed to a plan by the employer are treated as investment in the contract or basis since the amounts, if paid directly to the employee, would have been excludable from gross income."

I think the issue hinges on the distributions being considered "eligible rollover distributions", and the answer may be Yes for the US-based folks and No for the overseas-based folks. If yes, then the 20% rules apply, if No, then the elective w/h rules apply.

Anyone?

[Guest Mark Draa]

Additional info:

40 participants:

22 are US-based and are all US citizens

18 are overseas-based, and 16 of them are US citizens. 2 are not.

Plan is apparently "non-electing".

Hope this helps!

Mark