Identity Crisis: Am I a Church Plan? And Why Should I Care? Sponsored by. October 17, The Gustavus Adolphus experience

Transcription

1 Identity Crisis: Am I a Church Plan? And Why Should I Care? Sponsored by Kirk Beyer Gustavus Adolphus College Director of Human Resources Bob Architect VALIC Vice President, Compliance & Market Strategy October 17, 2012 Agenda The Gustavus Adolphus experience Understanding church plans Benefits of church plan status Key considerations Initiating the conversation 1

2 The Gustavus Adolphus Experience History Evolution of application: Healthcare Retirement Insurance, COBRA State regulations Reflections on the experience Understanding Church Plans Two basic types of church plans Plans of steeple churches (QCCO) Church plans of non-steeple churches (Non-QCCO) 2

3 IRC 3121(w)(3)(A)(B) (Steeple Churches) Churches, conventions or associations of churches; church controlled schools Qualified Church Controlled Organizations (QCCOs) church controlled 501(c)(3) offering goods, services or facilities substantially less than the cost of providing no more than 25% of support from non-church revenue Churches & QCCOs No written plan required for 403(b) unless a 403(b)(9) Retirement Income Account no ERISA coverage; unless elected section 403(b)(12) nondiscrimination rules NOT applicable --Applies to both employer contributions & universal availability for elective deferrals 3

4 Other Religious Organizations (Non-QCCO) Section 414(e) religious employers that are controlled by and/or share common religious bonds with the church must have written plan even if only 403(b)(1) annuities/403(b)(7) custodial accounts section 403(b)(12) nondiscrimination rules do apply exempt from ERISA; unless elected Benefits of church plan status Exempt from ERISA: No Form 5500 reporting No Independent audit requirements No fee disclosure requirements No ERISA-imposed fiduciary responsibilities 4

5 Benefits of church plan status Certain Internal Revenue Code provisions not applicable: Current minimum participation standards Current vesting requirements No joint & survivor annuity requirements No minimum funding requirements (DB plans) The election into ERISA All IRC and ERISA provisions applicable Election made under 410(d) of IR Code Must be in writing by plan administrator No deemed election Election is irrevocable 5

6 Church plan status for 401(a) and 403(b) plans: Not a slam dunk More than just a name! Whose plans qualify? Retirement plan of: A church A convention of churches An association of churches Which includes: A tax-exempt organization controlled by or associated with a church, convention or association of churches 6

7 Basic rules Plan must have been established and at all times maintained by a church, convention or association of churches Not correctable Must be administered by a committee that shares common religious bonds with the church Prospectively correctable Basic rules (continued) The entity must be tax-exempt Not correctable The entity must be associated with or share common religious bonds with the church 7

8 Basic rules: some examples Share common religious bonds: A specific, defined church is needed Example: The Lutheran Church (broadly) A particular congregation not needed An ecumenical movement will probably not work YMCA Bible translators Basic rules: some examples Established and at all times maintained by a church: Tax-exempt hospital taken over by church Not with church at inception of plan 8

9 Basic rules: some examples Administered by retirement plan committee sharing common religious bonds Plan established and maintained by church in 1990 Used investment house as plan committee Committee corrected in 2010 Church plan starts in 2010 Counting Years of Service; Prior Contributions; 415(c)(7)(B) Years of service are counted for all years with the church not just the current church employer Prior contributions (for the 15+ year increased limit) are counted for all years of service not just the current church employer 9

10 3121(w) Churches & QCCOs Must follow applicable requirements of the 403(b) regulations, even where no written plan required limit contributions in accordance with yearly limits remit salary reduction contributions timely coordinate/monitor loans and hardship withdrawals Other Plans Nondiscrimination rules do apply to Churches & QCCOs sponsoring 401(a)/401(k) plans Churches & QCCOs can sponsor non-qualified deferred compensation plans, not subject to the rules of 457 are subject to 409A 414(e) religious organizations can sponsor 457(b) plans for the rank & file unless ERISA coverage elected 10

11 Exploring whether church plan status is right for your institution Asses quantitative value Time, money and resources Do the necessary ties exist? Are the basic requirements met? Philosophical considerations Discuss with counsel Questions? 11

12 Securities and investment advisory services are offered by VALIC Financial Advisors, Inc., member FINRA and an SEC-registered investment advisor. The information in this presentation is general in nature and may be subject to change. Neither VALIC nor its financial advisors or other representatives give legal or tax advice. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. For legal or tax advice concerning your situation, consult your attorney or professional tax advisor. VALIC represents The Variable Annuity Life Insurance Company and its subsidiaries, VALIC Financial Advisors, Inc. and VALIC Retirement Services Company. For Plan Sponsor Use Only Copyright The Variable Annuity Life Insurance Company. All rights reserved. VALIC.com 12