Help - with question on church plan

[Guest sb000]

Hello,

I am helping a friend of mine with their church 403b and getting a plan document.

Currently they do not allow for employee contributions, it only has a discretionary contribution. The discretionary contribution is paid to the pastors of the church (it is very small), the one administrative assistant does not receive a contribution.

They are considering allowing employee contributions. From what I understand the administrative assistant could not be excluded from making contributions because she works more than 20 hours per week (and would not be part of another type of excludeable class - at least from what I understood with universal availiability).

My question is, if they allow for employee contributions would then the administrative assisstant have to be included in the discretionary contribution? I believe that the discretionary contribution would be set by the board of directors, or could the BOD exclude certain employees from receiving the contribution?

Thank you VERY much for your help!

[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.

[TLGeer]

I am assuming the plan is for just the church proper. If so, the universal availability rule does not apply. However, UA only applies to employee contribution rights, not to employer contributions. The employer contributions for plans of a church proper are not subject to any tests other than the 403(b) limitations, so the employer can do pretty much whatever it wants. Structurally, the easiest way to set this up is with a plan that has language like a cross-tested/new comparability plan (i.e., each employee is a separate category, and we'll decide annually what to put in).

Don't overgeneralize from what I just said. There are at least 6 different kinds of church 403(b) plans, and the rules vary from one to the other. For those who think they are interested, they are:

1-Plans of churches or conventions or associations of churches-nonelecting

2-Plans of churches or conventions or associations of churches-electing

3-Plans of qualified church-controlled organizations-nonelecting

4-Plans of qualified church-controlled organizations-electing

5-Plans of other church-related organizations-nonelecting

6-Plans of other church-related organizations-electing

Tom Geer