Non-Electing Church 403(b) Plan

[oldman]

We have a non-electing church 403(b) plan that calculates years of vesting service based on participant's participation date, not hire date or plan year. Vesting is based on elapsed time. §1.410(a)-7 provides that method of crediting service focuses on the length of time during which the employee continues to be employed. Furthermore, in accordance with §1.410(a)-7(d)(1), plan using elapsed time method, participant receives years of service, for vesting purposes, based on participant's period of service, whether or not such periods of service were completed consecutively.

Based on the above, I believe the plan cannot use the participant's participation date as the basis for calculating years of vesting service. Do you agree?

[ETA Consulting LLC]

You have to further apply the service spanning rules for breaks in employment of less than 12 months. For breaks exceeding 12 months, the vesting service date would move foward for the amount of time that elapsed (so you would no longer use the initial employment date).

Good Luck!

[Kevin C]

Maybe I'm missing something, but why would a non-electing church 403(b) be subject to regulations under 410(a)? Sections 410 and 411 do not apply to non-electing church plans as long as they meet the applicable pre-ERISA requirements. See 410©(2) and 411(e)(2).

[ETA Consulting LLC]

You're not missing anything. Many churches apply vesting schedules that are aligned with those in the Regulations; even though they are not required to. Hence, if they are using 'elapsed time' to calculate service, they should apply the service spanning rules for consistency.

Good Luck!

[Kevin C]

I read the OP as asking if the plan's vesting provisions are not allowed because they conflict with the 410(a) regulations. As a non-electing church plan, the regulations under 410(a) do not apply. The terms of the plan control.

[ETA Consulting LLC]

Yep, but it's a 403(b); so they aren't even required to have a written plan.

Another provision that doesn't apply to non-electing churches

Kevin C, I think we are on the same page on this one, but merely approached the question differently.

Good Luck!