FAQ
Eligibility
Is it necessary to treat all employees exactly the same, if all are eligible to participate? For instance, if you offer to match a certain amount for credentialed pastors, must you offer the same thing to all the other employees?
District offices, churches, church schools (preschool through 12th grade), and qualified church-controlled organizations may choose to offer any 403(b) contribution benefits to any or all employees in any way they wish.
Nonqualified church-controlled organizations (NQQO) must offer deferral contributions to most employees if they offer deferrals to any (see: universal availability). If an NQCCO has any highly compensated employees, they cannot discriminate in matching and discretionary employer contributions (see: nondiscrimination coverage). Excludible employees are listed on the NQCCO plan tools located here.
We only have the senior pastor on staff now. How would we complete the plan template if we will not offer 403(b) contributions to any part-time staff in the future?
Churches and QCCOs have a lot of flexibility in how they structure eligibility and service requirements, and in what contribution benefits are offered.
Example: If to wish to restrict eligibility to the senior pastor only, type “senior pastor only” on the “other” line under eligibility in the employee contribution and/or employer contribution sections.
MBA would suggest to all AG employers to allow salary deferrals by all employees (or at least, those that work over 20 hours per week). This is a low cost way of allowing employees to save for retirement in a tax-advantaged account.
Do we need to document our 401(k) plan in our 403(b) documents? Can we exclude employees who are eligible for our 401(k) plan?
In the 403(b) plan, it is advisable to mention that you offer the 401(k) plan. You should definitely mention the 401(k) plan if 403(b) benefits are tied to the 401(k), (e.g. ,“all employees who are eligible to participate in the 401(k) plan...”
A church, church school, or a QCCO may exclude employees from a 403(b) plan if they wish. A NQCCO may exclude highly compensated employees (HCE's) from a 403(b) plan. If a NQCCO includes HCE's in the 403(b) plan, they must include most other employees.
Please note the following:
- Churches, church schools, and QCCOs are subject to the universal availability rules for deferrals in a 401(k) plan but not in a 403(b) plan.
- Churches, church schools, and QCCOs are subject to the nondiscrimination rules and related testing in employer matching and discretionary contributions in a 401(k) plan but not in a 403(b) plan.
- The deferrals made to 403(b) plans and 401(k) plans must be aggregated to ensure that the total (per employee) does not exceed elective deferral limits.
- 403(b) plans allow for additional elective deferral limits for long-term employees and an alternative limit that allows for extra contributions for employees with less than $10,000 in includible compensation. 401(k) plans have no such provisions.
What if our church opens a daycare center?
If your church opens a daycare center that is an integral part of the church and not a separate entity, your plan may already cover those employees (example: “all employees may participate”). If the daycare workers will have different eligibility requirements, you will need to amend your current plan to state the specific eligibility requirements for those workers.
If the daycare center is a separate entity, the daycare will need to adopt and complete its own plan for participation.
We offer a single benefit amount that each employee can use to choose among a list of benefits, (e.g., health and retirement). Will we need to change this based on the new 403(b) regulations?
If you are a nonqualified church-controlled organization, you may be violating nondiscrimination rules to offer employer contributions in such a manner.
If you are a church, church school, or a qualified church-controlled organization and you also offer the option of cash in lieu of one of the named benefits, you may be violating the cafeteria plan rules. However, if you don’t offer cash as an employer benefit option, you may be okay to offer an employer-paid 403(b) benefit. You should consult your tax or legal professional to make sure.
Can a nonprofit LLC offer a 403(b) plan to their employees?
Only tax exempt organizations that are 501(c)(3) organizations (and public schools) can offer 403(b) plans. IRS has privately ruled that employees of an LLC whose sole member is a 501(c)(3) organization may participate in an organization's 403(b) plan as long as the LLC’s separate status is disregarded for federal tax purposes.
A further requirement to participate in MBA’s 403(b) plan is that an organization must also be associated with the Assemblies of God or controlled by an Assemblies of God church, district council, or The General Council.
We have a retirement center that is part of our church. It has a separate tax identification number from the church but has the same official board as the church. Would the retirement center be a QCCO or NQCCO? Could center’s employees be offered the 403(b) retirement plan?
Is the retirement center a 501(c)(3) organization? If it is, apparently it can participate in the MBA 403(b) because it is church-controlled. You must then determine if the retirement center is a QCCO or NQCCO using the tests listed here.
If the retirement center is an NQCCO, you must offer deferrals to all employees if you offer it to one. If the center has any highly compensated employees , you cannot discriminate in favor of them in matching and discretionary contributions.