(b)lines Ask the Expert – Church Plans

October 21, 2008 (PLANSPONSOR (b)lines) - A plan adviser asks: "What exactly are the requirements for a church plan that has an employer match? Do they need a document? A 5500? Should they have an IPS?"
By PS

That is a very broad set of questions in an area, church plans, with many special rules under both the Internal Revenue Code and ERISA.  Church plans are defined in Code section 414(e) and ERISA section 3(33).  If a plan sponsor has a church plan, it is not subject to ERISA unless an election is made to be subject to ERISA under section 410(d) of the Code. 

Assuming the plan has not made such an election, it would not have to file a Form 5500.  As exempt from ERISA, the church plan would also not be subject to the written plan document requirement of ERISA, but the final 403(b) regulations added an IRS requirement that 403(b)(9) church retirement income account plans have written plans to comply with the Code.  Curiously, they exempted from the Code-based written plan requirement one type of church plan, the church 403(b)(1) plan.

Also, while exempt from ERISA, church plans may not be subject to the fiduciary rules of ERISA, but following them voluntarily, including having an Investment Policy Statement, is not a bad idea, particularly where state fiduciary rules may apply.

Church plans are generally not subject to the nondiscrimination rules of Code section 403(b) such as the 401(m) test on matching contributions, except that nondiscrimination rules do apply to organizations which are not churches or qualified church-controlled organizations, as defined in Code section 3121(w)(3)(A) and (B).  The determination of when an organization is a non-qualified church-controlled organization is a complex factual determination.

– David Powell, Groom Law Group, Chartered

NOTE: This feature is to provide general information only, does not constitute legal advice as part of an attorney-client relationship, and cannot be used or substituted for legal or tax advice.

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