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In a Church Related Organization, have a Nun that has taken a vow of poverty. She "earns" over $150,000 for which she passes on to the convent. This is with respect to a 403(b) plan that is subject to discrimination tests since it is not a 3121(w)(3)(A) or (B). Should she be included in the ACP test as an HCE? If is included, seems as though her not deferring anything, and therefore not receiving any match, would actually benefit the other HCE's by having a higher ACP?

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Read Revenue Rulings 68-123, 77-290, 83-126, and 83-127.

Based on this and anything else that you and your lawyer find, consider whether the compensation is or is not the nun's income for Federal income tax purposes.

If it is not (and there is no other compensation), ask for your lawyer's advice on whether it might be a good-faith interpretation to not count the nun in either part of the fraction or ratio.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania



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