"Controlled Group"

[Randy Watson]

What exactly is meant by an "association of churches"? Can you have the employees of a number of different parishes participate in the same qualified plan without creating some sort of multiple employer plan? As you can probably tell, I don't deal with church plans...at all. Please help!

[Guest Danny Miller]

What exactly is meant by an "association of churches"? Can you have the employees of a number of different parishes participate in the same qualified plan without creating some sort of multiple employer plan? As you can probably tell, I don't deal with church plans...at all. Please help!

You ask a good question. It's clear under Code section 414(e) that an "association of churches" can establish a "church plan." (Singular) However, under the qualified plan rules, I believe that the typical defined contribution church plan is a multiple employer plan. (If the plan is a DB plan, then it may be a "single plan" under the 414(l) rules.) But that's not the end of inquiry. In the case of a qualifed DC church plan, how do the new 414© controlled group rules apply, effective 1/1/09? Churches (i.e., steeples) and qualified church controlled organzations are not subject to these rules. However, the model 403(b) plan laguage contained in Rev. Proc. 2007-71 contains a note that indicates that it is the IRS's view that churches are subject to a reasonable, good faith interpretation requirement for determining if they are in a controlled group, using the special rules of IRS Notice 89-23. (One of the special rules in that Notice is of course the general rule that applies to all nonprofit employers under the final 414© nonprofit controlled group regs.)

The bottom line, it seems to me, is that churches in most congregationally governed denominations won't together constitute a controlled group, and thus a single employer, so the denomination's qualifed plan will be a multiple employer plan. But that's just my two cents on the issue. Hope this helps.