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Employer Distributions

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I am on the staff of a small church that has a 403(b) plan for its employees. I have two questions about our obligations to meet the employer distributions and employee participation.

 

1) The church is permitted by the IRS to offer a single distribution rather than a monthly distribution. Because we were (marginally) solvent at the end of 2003, we elected to distribute 2% of an employees contribution into each employees plan. One of our employees is a W-2. Earlier in 2003, when we were not solvent, he pulled out of the 403(b) plan and withdrew his monies. Currently he does not contribute to the 403(b). We know that there are certain elements of 'equity' among employees regarding offering the plan. However, we are not able to find any guidance as to whether we are required to distribute calculated 2% to his account for the time in 2003 or, since he is not participating in the plan and has no account, we are to distribute no funds to his account. Calls to IRS are of no help. Since he is still employed by the church, is he still considered a 403(b) participant? Does he 'technically' still have a 403(b) account?

 

2) The IRS indicates that if a part time employee works less than 20 hours per week, the employer is not obligated to offer a 403(b). We have a number of 1099 situations (part time organist, musicians, etc) who have 1099 status. Can we (a) distribute 2% into accounts for full time employees but only 1% into accounts for part time employees or (b) must we distribute the same percentage to all, regardless of their payroll status?

 

Any insight would be helpful.

 

 

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Guest Chuck Yanikoski

You may need a good pension attorney's advice here.

Church organizations are generally not subject to ERISA and its non-discrimination rules. So unless you have opted into ERISA, you don't have to worry about these rules. Presumably, then, your requirements are governed only by the rules of the plan document, if you have one. (You really should have one, if you are making employer contributions, just for this kind of situation. But if you don't, you don't.) But a pension attorney could tell you with more certainty.

Also keep in mind that the IRS does not enforce ERISA -- the Department of Labor does. You might try giving them a call.

 

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Guest Guest_churchman

Chuck, thanks for the insight. I will follow up with the finance committee with your points. Anyone else want to chime in?

 

 

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