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September 22, 2011 at 08:00 PM
Church plans will have to notify plan participants before asking the Internal Revenue Service (IRS) to provide private letter rulings confirming the plans’ status.
The IRS has spelled out church plan letter ruling application rules in IRS Revenue Ruling 2011-44.
Section 414(e) of the Internal Revenue Code (IRC) defines a church plan as a plan for that covers church employees and the employees’ beneficiaries, or the employees of a tax-exempt association of churches and those employees’ beneficiaries.
IRC Section 410(d) lets church plans decide whether to be a “qualified church plan” or a “nonelecting church plan.”
A “nonelecting church plan” that chooses not come under the Employee Retirement Income Security Act (ERISA) need not meet the tax code requirements that normally apply to 401(k) plans, such as minimum vesting requirements and minimum participation requirements.
A nonelecting church plan that happens to be a defined benefit pension plan can stay out of the Pension Benefit Guaranty Corp. pension insurance program.
But a nonelecting church plan could be subject to state benefit plan laws, and it does not qualify for the same tax breaks that a qualified church plan gets.
