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Exemption From 403(b) Discrimination Rules


QDROphile

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A 403(b) plan of a section 3121(w)(3)(A) or section 3121(w)(3)(B) organization is exempt from all 403(b) discrimination rules. Is the exemption from the rules listed in Treas. Reg. section 1.403(b)-5(a)(1) -- borrowed from the qualfied plan rules -- also conditioned on being a section 3121(w)(3)(A) or section 3121(w)(3)(B) organization or is there room for exemption from the -5(a)(1) rules based on the section 414(e) church plan standards?

For exemple, a non-electing church plan under section 414(e) that is not the plan of a section 3121(w)(3)(A) or section 3121(w)(3)(B) organization would not be subject to by the current provisions of section 410(b) if the plan were a qualified plan. If the same organization had a section 403(b) plan, would it be subject to the post-ERISA section 410(b) standards?

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  • 1 month later...
Guest alex1245

yesi do think it would be subject to the post-Erisa section 410(b) standards, i will check this and will inbox you

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jpod:

Are you saying that if an employer meets the 401(k) plan definition for maintaining a church plan that the 403(b) plan of that employer should not be subject to 410(b) requirements (just as a 401(k) plan of that employer would not be subject to 410(b))? Or do you have someother analysis or authority?

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  • 2 weeks later...

QDRO: Here's what I meant. If the 403(b) plan is a non-electing church plan 410(b) doesn't apply. The authority is that Section 403(b)(12) says that 410(b) applies "in the same manner as if such plan were described in Section 401(a)," and 410(b) doesn't apply to a non-electing 401(a) church plan by virtue of the very last sentence of 401(a). J4FKBC is correct that pre-ERISA coverage rules would apply.

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The question arises because of the definition of "church." An organization can be a church for purposes of section 401(a) and ERISA (a "401(a) Church"), but not be a church under section 403(b)(12)(B). Example: a college. Under section 403(b), the plan of the 401(a) Church is subject to various section 401(a) requirements, as you say, "in the same manner as if such plan were described in Section 401(a) ***." If the 401(a) Church adopted a 401(k) plan that had the same essential design as the 403(b) plan of the church, we know that various section 401(a) requirements (including section 410(b)) would not apply. Why would the definition of church under section 403(b)(12)(B) effectively say that the requirements of section 403(b)(12)(A)(i) apply to the 401(a) Church if the language of section 403(b)(12)(A)(i) itself excuses the 401(a) Church by incorporating the exclusion of the 401(a) Church in "as if such plan were described in Section 401(a)"? Is this absurdity an indication that the section 401(a) exemption for churches is not included in "as if such plan were described in Section 401(a)" and section 410(b) and other section 401(a) requirements therefore apply the 401(a) Church plan? Or did the drafters of section 403(b) botch the language by not reconizing that 403(b) has a definition of church that is different from the section 401(a) definition and the result under section 403(b)(12)(A)(i) is the same as if the section 401(a) definition of church applies under section 403(b), intended or not?

I appreciate your clarification, but would clarify further that you think the absurd literal result is the correct one -- that section 403(b) effectively has a definition of "church" that is the same as section 401(a)?

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QDRO: I may not be following your train of thought completely, but I don't think it's absurd at all. A 414(e) church plan would still have to comply with the other Code sections listed in 403(b)(12)(A)(i) (e.g., 401(m)), whereas a 3121(w) church need not comply with any of those Code sections.

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