Church 403(b) HELP

[Guest JerLon]

I'm trying to help a small church set up a 403(b). I have a few questions:

Is it possible to set up the plan document to give one employee (head pastor) a lump sum contribution each year? ie: we will put in $10,000 each year?

Ideally, we would like to do the following:

-3% match for all church employees

-Allow employee contributions

-Lump sum each year for the head pastor

Is it possible to do this? I have no clue where to look for sample plan documents. For something this basic, do we need to hire a firm to do it, or could I do it myself?

Ideally, we will do this through vanguard 403(b)(7) accounts for small businesses.

[ETA Consulting LLC]

A church plan does not require a plan document; nor do the universal availability rules (or non-discrimination rules) apply.

Good Luck!

[Guest JerLon]

A church plan does not require a plan document; nor do the universal availability rules (or non-discrimination rules) apply.

Good Luck!

So, essentially, we can do whatever we want?

[ETA Consulting LLC]

Essentially, yes. It's business as usual. Many of the IRS changes to 403(b) did not affect church plans.

Good Luck!

[mbozek]

A church plan does not require a plan document; nor do the universal availability rules (or non-discrimination rules) apply.

Good Luck!

So, essentially, we can do whatever we want?

Not exactly. While a written plan document stating the plan terms is not required, the plan mus still conform to the IRS regs which is a reason to have a written document that incorporates basic terms of the agreement so that the employer and employee are aware of the rules that apply.

[ETA Consulting LLC]

Not exactly. While a written plan document stating the plan terms is not required, the plan mus still conform to the IRS regs which is a reason to have a written document that incorporates basic terms of the agreement so that the employer and employee are aware of the rules that apply.

I, respectfully, disagree. The terms are still written within the contract; the same as it has always been prior to the new rules. A church plan enjoys many exceptions that other plans do not. They may cover "ONLY" the pastor if they choose. They "may" cover other employees while giving non-elective contributions to "ONLY" the pastor. That precendent has been long established. I wouldn't begin to suggest that it's better to have something that is not required. To do so is to inject an arbitrary standard that really isn't necessary for church plans. I respect your opinion, but just disagree with it.

NOW, if it were a 403(b)(9), then the situation would be entirely different.

Good Luck!

[mbozek]

Not exactly. While a written plan document stating the plan terms is not required, the plan mus still conform to the IRS regs which is a reason to have a written document that incorporates basic terms of the agreement so that the employer and employee are aware of the rules that apply.

I, respectfully, disagree. The terms are still written within the contract; the same as it has always been prior to the new rules. A church plan enjoys many exceptions that other plans do not. They may cover "ONLY" the pastor if they choose. They "may" cover other employees while giving non-elective contributions to "ONLY" the pastor. That precendent has been long established. I wouldn't begin to suggest that it's better to have something that is not required. To do so is to inject an arbitrary standard that really isn't necessary for church plans. I respect your opinion, but just disagree with it.

NOW, if it were a 403(b)(9), then the situation would be entirely different.

Good Luck!

Contracts do not define the terms that govern the relationship between the employer and employee that determine the how and when. The reason for having a written document of some kind is so that all parties know what the rules are for making contributions and other terms that affect the participant- such as when the contributions will be made, what will be the max amount, whether contributions be discretionary, what happens if less than a full years service is completed, whether loans will be permitted, salary reduction, etc, in order to remove ambiguities which usually arise if there is no written document. Assuming that all of the important terms that apply to the obligations of the parties is contained in an insurance contract is prescription for disaster. Document does not have to complicated and can be limited to a few paragraphs.

Putting the material terms in writing will avoid misunderstandings later on.

[ETA Consulting LLC]

Contracts do not define the terms that govern the relationship between the employer and employee that determine the how and when. The reason for having a written document of some kind is so that all parties know what the rules are for making contributions and other terms that affect the participant- such as when the contributions will be made, what will be the max amount, whether contributions be discretionary, what happens if less than a full years service is completed, whether loans will be permitted, salary reduction, etc, in order to remove ambiguities which usually arise if there is no written document. Assuming that all of the important terms that apply to the obligations of the parties is contained in an insurance contract is prescription for disaster. Document does not have to complicated and can be limited to a few paragraphs.

Putting the material terms in writing will avoid misunderstandings later on.

Understood. 403(b)s have operated years without the written plan rules. At the same time, the written plan requirements have always existed for those non-profits who were subject to ERISA because of the Employer Contributions. The churches can continue to operate as they always have. I would doubt many of the non-compliance issues the IRS has historically found in audits were from church plans. Schools, on the other hand, is a different story.

Anyways, I appreciate your opinion; it's just as valuable as mine

Good Luck!