David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:
This is one of those questions where, as is often the case with church plans, the answer differs depending on the type of employer. If the entity is a “steeple” church or qualified-church-controlled organization (QCCO) under Code Section 3121(w), then you are correct. Such organizations are not eligible employers under code Section 457, and thus cannot sponsor 457(b) plans.
However, tax-exempt entities which are NOT churches or QCCO’s, such as church hospitals, nursing homes, and religious colleges/universities, can indeed maintain 457(b) plans. Thus, it is quite important to know the type of church entity with whom you are working in determining whether or not that organization may sponsor a 457(b) plan. However, note that some cases have been filed challenging whether non-QCCOs can establish church plans at all, and the Supreme Court is expected to rule on that later this year.
NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Rebecca.Moore@strategic-i.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future Ask the Experts column.
« TRIVIAL PURSUITS: From where did the tooth fairy originate?