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403(b)
Regulation Resources
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[Employer
Plan: Church
of God Retirement Plan |
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| This information should not be considered tax or legal advice. The Board of Pensions stands ready to assist your organization as you work with your legal and tax advisers by providing resource information that you and your adviser may find beneficial. |
The
issuance of final 403(b) regulations caused a shift in employers’
responsibilities for the administration and compliance of 403(b) plans.
Effective January 1, 2009, the IRS treats each “employer” as
responsible for maintaining the “plan” for its employees and also
for managing all 403(b) providers. If
the Church
of God Retirement Plan
is just one of multiple 403(b) arrangements available to your
organization’s employees, your organization will be responsible for a
separately written “403(b) plan document “ (which incorporates the
multi-vendor relationships) and for vendor compliance coordination.
The organization can designate compliance and other
administrative responsibilities to a Third-Party Administrator (TPA) or
one of the vendors, if agreed. The
Board of Pensions does not serve as a TPA for multi-vendor arrangements.
The
Written
plan document requirement ·
Identification of eligible employees ·
Statutory (legal) contributions limits ·
Time and form of benefits ·
Distribution restrictions ·
List of 403(b) service provider(s) allowed by the employer The written plan can
incorporate materials from other documents such as written policies,
employee handbook descriptions and other related documents.
The Board of Pensions provides general plan documentation for the
Church
of God Retirement Plan v.20100626 (pdf).
However, since each employer in the Church
of God Retirement Plan
has flexibility related to certain plan provisions, your organization
must develop and maintain additional written rules and procedures
regarding your arrangements that address:
To help you with
this, the Board of Pensions has prepared an Eligibility
and Participation Schedule (pdf) to document the
additional written rules and procedures, unique to your organization,
that relate to your use of the Church of God Retirement Plan.
You should print out a copy of this Schedule and fill it out as
soon as possible so that it is completed before 2009.
This Schedule is considered part of your
organization’s 403(b) plan. That
means that any time you change any provisions that relate to your
participation in the plan, you must complete an updated Schedule.
You do not have to send this Schedule to the Board of Pensions
but you do need to be sure to keep an updated copy in your files at all
times. And, of course, you
will need to be sure that you follow the rules and procedures that you
set out in the Schedule.
Additional
actions required
The purpose of
the requirements for sharing information is to exchange information
necessary to satisfy the Regulations and other tax requirements of the
Code. Such information
includes, but is not limited to:
This
information sharing requirement is very important because beginning
January 1, 2009, employers are responsible for ensuring overall
compliance with statutory and regulatory requirements.
If your organization offers more than one 403(b) provider for its
employees, the Board of Pensions is limited in the guidance we can give.
In this situation, we welcome inquiries and may assist with
general information that could be helpful to the employer’s own legal
counsel. But the employer is
responsible for coordinating compliance among the different 403(b)
providers. If your
organization makes contributions to the Church
of God Retirement Plan
as a sole retirement plan provider, there is no need to coordinate
compliance among multiple 403(b) providers.
In this situation, the Board of Pensions can do more to help
ensure that your organization’s plan complies with all legal
requirements. However, your
organization will still have to provide information to the Board of
Pensions so that it can ensure compliance. Timing of in-service distributions from employer contribution accounts This
provision impacts plans that allow employees to withdraw
employer-contributed dollars while still in service to that employer
without the occurrence of some event, such as reaching a specified age.
Since the Church
of God Retirement Plan
does not make provision for in-service withdrawals of employer dollars
until participants are 60, this regulation change is already satisfied
for churches that use only the Church
of God Retirement Plan. New
definition of severance from employment The
new regulations provide some additional clarity to legal terms and
phrases, one of which is “severance from employment.”
For most churches and for employers that are simple single legal
entities, this change will have no impact.
The definition of “severance from employment” becomes
important for certain plan provisions regarding distributions.
Universal
availability Certain
403(b) plans are subject to annual retirement plan nondiscrimination
testing that demonstrates the plan does not discriminate in favor of
highly compensated employees in design or practice.
Plans subject to testing include 403(b) plans of employers such
as nonprofit hospitals, colleges, universities and some children’s and
retirement homes. Under one
of these nondiscrimination rules, plans of these employers must satisfy
the “universal availability” requirement.
In simple terms this means that if you allow one employee to make
personal tax-deferred contributions (salary reduction deferrals) to the
plan, you must let all employees make personal tax-deferred
contributions. Certain
limited groups of employees can be excluded from making personal
tax-deferred contributions to the plan, and these exclusions must be
stated in the written plan document.
For example, one of the groups of employees that can be excluded
from the universal availability requirement is, “employees who
normally work fewer than 20 hours per week.
Violation of the universal
availability rule is best avoided by allowing all employees to make
Participant Before-Tax Contributions (salary reduction deferrals) to the
plan. Effective
opportunity required As
a part of the universal availability requirement, the IRS wants to
ensure that employers take steps to make all employees aware of their
right to participate in the retirement plan. Therefore, the new
regulations require employers to demonstrate that employees are being
provided with “an effective opportunity” to make elective deferrals
(personal tax-sheltered contributions).
According to the IRS, whether this standard is being met depends
on specific “facts and circumstances” such as whether the employer
provides ongoing notice to employees of the opportunity to make elective
deferrals. In essence, the
regulations are sending a message to all employers to make, and continue
making, employees aware of the tax deferral opportunities available to
them under their retirement plan. This
is the responsibility of the employer.
The Board of Pensions and other 403(b) providers are not
responsible for making sure that all employees are provided with this
notice. Requirement
to follow plan terms As
mentioned earlier, all 403(b) plans must be documented in writing.
A failure to follow these written plan provisions can result in
adverse tax consequences for individual plan participants and/or all
plan participants, depending upon the nature of the failure. Other possible
compliance concerns There are other
compliance issues that could arise if your organization allows
contributions to be made to multiple 403(b) investment providers and if
transfers of money are permitted between these 403(b) providers.
Money can still be moved, but there are now additional
requirements on any such movement of 403(b) plan assets. For example, some 403(b) investment providers may permit employees to make “contract exchanges”. A “contract exchange” is a movement of a participant’s plan account from a 403(b) investment provider that is approved to receive ongoing contributions under the employer’s 403(b) plan (i.e., a 403(b) provider that has a “payroll slot”) to a 403(b) investment provider that is not approved to receive ongoing contributions. The Church of God Retirement Plan does not permit such contract exchanges to be made with any accounts that are held by the Board of Pensions but other 403(b) investment providers may permit contract exchanges to be made with accounts that they are holding. There are several additional requirements that apply to contract exchanges and you should discuss these requirements with your organization’s legal counsel before approving any such exchanges. Additional
resources: |
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Board of
Pensions of the Church of God |
