Can A 403(b) Plan Continue to Provide Benefits Once The Sponsoring Organization Shuts Down?

Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.


We work with a church plan sponsor which is ceasing to exist in 2023. The church sponsors a 403(b) plan and does have a retirement plan commitment to a pastor who is the participant in the church’s 403(b) plan. I have always thought that a plan must have a sponsor. So, in effect, when the sponsor ceases to exist, the plan terminates. Having said that, is there a way to help this church provide for a contribution to this plan over the next five years, even though the church will be gone? The amount exceeds the legal limits for a contribution in 2022 and another in 2023 because the pastor’s salary is low, which creates a problem with the Internal Revenue Code Section 415 limit.


Kimberly Boberg, Taylor Costanzo, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:


A: No, the church cannot provide contributions over the next five years, because a 403(b) plan must be sponsored by an eligible employer to make contributions to the plan. Treas. Reg. § 1.403(b)-2(b)(8)(C) permits a minister to be an eligible employer for a retirement income account (403(b)(9) account) established solely for the minster. However, if this 403(b) was established to include other church employees, then this is not an option.


The only remaining solution is to maximize the pastor’s 403(b) contributions for 2022 and 2023. You are correct, however, that if the pastor’s compensation is nominal, this may not provide much relief, as contributions are typically limited to 100% of salary. There is a limited exception to this rule where the pastor could receive up to $10,000 per year in retirement contributions for 2022 and 2023, even if the pastor’s salary is less than $10,000. To learn more about this, check out one of our previous Ask the Experts columns.

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. 

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