Over the years, ADMIN Partners has used this blog as a way to educate our community on the services we offer and provide insights into the retirement planning industry. We have also used this platform as a way to examine how retirement planning impacts the various clients that we service. You may have seen us discuss the benefits a 403(b) plan brings to non-profit organizations and even how those working in public education can better plan for their future by investing in their employer-sponsored plan. What you have not heard us talk about, is how 403(b) plans can greatly benefit churches and religious organizations. Not only do these groups get the normal benefits that come with a 403(b) plan, but their organization class also allows them some additional plan options not offered in other plan types.
Here are the 403(b) benefits for church/religious retirement plans.
NONDISCRIMINATION RULES
Along with the optional ERISA election, church/religious 403(b) plans also have different nondiscrimination rules than most 403(b) plans do. While most 403(b) plans have to adhere to strong regulations surrounding the benefits that they offer to employees (also known as nondiscrimination rules), church and religious plans have a more flexible design. This unique setup allows these groups to create different rules surrounding provisions such as eligibility and contributions for different groups of employees. For example, a steeple church may allow an employer match for pastors, but opt to exclude this source type for others employees. Religious organizations are also able to include options such as housing allowance for clergy members which you can read more about here.
MULTI-EMPLOYER & MULTI-LOCATION PLAN DESIGN
It’s not uncommon for religious organizations to have a group-like arrangement when it comes to retirement planning. Whether it’s a church that has multiple locations or a diocese that sponsors a number of churches, the retirement plan being offered will need to support this type of arrangement.
In the 403(b) world, there are a number of religious organizations who benefit from a Multi-Employer Plan (MEP). This type of plan is typically composed of one main church or organization who sponsors the 403(b) plan for additional churches and organizations who may participate in the plan. In an MEP setup, the plan will operate under a plan document for the sponsoring plan and participating organizations will have to complete a joinder agreement relating them to the sponsored 403(b) plan. Sponsoring plans can decide if joinder agreements will allow the participating churches/organizations to have their own plan provisions or if they will all operate the same as the main plan document.
Similar to MEP designs, a multi-location church will require a plan design that supports the various locations operating under their 403(b) plan. Along with the necessary plan documents to support this setup, most multi-location plans require administration support for things like compliance requests and contributions from more than one payroll system. This is why it is recommended that MEP and multi-location 403(b) plans bring in a full-service TPA who can help consolidate these day-to-day responsibilities. Contact ADMIN to learn more about these types of services.
Please note that church and religious organizations have a complex retirement plan design that requires expertise in not only plan design, but also plan compliance. To learn more about the 403(b) benefits and rules for churches and religious organizations, contact ADMIN’s team of experts at [email protected] or by phone at 877-484-4400.