HCE Determination for Church Sponsored 401(k) Plan

[AJC]

A church has decided to sponsor a new 401(k) plan effective 01/01/2019. There are a few ministers receiving a housing allowance, which by my understanding is not included as compensation under 415(c)(3). So, it seems a minister who during 2018 received paid compensation (for Federal income tax purposes) equal to $115,000 plus an additional $40,000 in housing allowance, would not be considered an HCE for 2019. Am I understanding this correctly?

[jpod]

So it would seem.  Why not go 403(b) and not ever have to worry about nondiscrim. rules at all?

[AJC]

So, why not go 403(b)? That was my first question to them. Their current leadership decided on a 401(k), based on the leadership's past experience with 401(k) under for profit organizations. And the plan sponsor had a not-so-good experience with a 403(b) in the past, basically due to not following the plan document. The same story seen with a lot of 403(b) plan sponsors.... no oversight (no tpa). Only an investment advisor and a cookie-cutter plan document.