Churches
of God,
General Conference Pension Plan
FAQs for CGGC Employers regarding 403(b) Regulatory Changes
Background Information
The 403(b)(9)
The IRS has published new regulations that will generally become effective for tax years that begin after Dec. 31, 2008. These new regulations apply to all 403(b) retirement plans, including 403(b)(9) church plans. Churches and employers that provide a 403(b) plan for their employees are required to comply with these new regulations. A failure to comply can cause adverse tax consequences for all participants in the employer’s 403(b) retirement plan.
The Board of Pensions has long been dedicated to enhancing the financial security of our participants. We are committed to helping your organization understand and take the necessary actions to successfully address these new regulations. The following questions and answers have been developed to provide you with a general introduction to this important topic that will impact every employer that offers a 403(b) retirement plan.
Will churches and organizations that use the CGGC Pension Plan be subject to these regulation changes?
Yes. But if your church or organization uses the Board of Pensions as your sole 403(b) retirement plan provider, the application of these changes will be simplified. If your church or organization allows plan participants to invest with multiple 403(b) providers or to transfer funds to other providers, compliance with these new regulations will be more complex.
Churches are excluded from some portions of the new 403(b) regulation changes. For example, plans of churches are not subject to certain retirement plan nondiscrimination provisions that apply to church-related organizations such as colleges, universities and hospitals.
What are the new IRS regulations for 403(b) retirement plans?
The following list includes a brief summary of the most significant 403(b) regulation changes. Churches are not subject to all of the new regulations. Those marked with an asterisk ( * ) are the regulations that apply to churches participating in the CGGC Pension Plan.
- * Written plan requirement. Churches and other organizations that provide a 403(b)(9) plan must maintain written documents that describe all material plan provisions. The written plan can incorporate materials from other documents such as written policies, employee handbook, and other related documents.
- * Requirement to follow plan terms. As mentioned earlier, all 403(b)(9) 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 of the employer, depending upon the nature of the failure.
- * Contract exchanges and plan-to-plan
transfers. Participants, employers and plan
providers now face new requirements if a plan allows participants to
transfer 403(b) funds in their retirement account from one plan
provider to another. Employers with multiple providers will
need to have arrangements to share information with all approved
providers. In addition, certain participant transactions,
including some types of distributions, will now require employer
consent. Note: Although the
- 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 with that employer without the
occurrence of some event, such as reaching a specified age.
Since the CGGC
Pension Plan does not permit in-service withdrawals of employer dollars, churches that use only the
- Universal availability and nondiscrimination requirements. Some 403(b) plans are subject to special rules designed to prevent discrimination in favor of highly compensated employees in design or practice. These requirements are not applicable to churches and qualified church-controlled organizations (QCCOs). They are, however, applicable to non-qualified church controlled organizations (e.g., church-related colleges, universities and nursing homes).
- Effective opportunity required. This is related to the universal availability provision above and is also not applicable to churches and QCCOs.
What actions should churches and organizations that participate in the CGGC Retirement Plan take to comply with the new IRS 403(b) regulations?
Employers should do the following by:
- Stay informed. While the new IRS 403(b) regulations have been released, guidance is still unfolding. In an effort to keep you apprised of new developments, the Board of Pensions will try to periodically provide updates via our Web site covering 403(b) regulations.
- Develop written policies and procedures.
The Board of Pensions provides general plan
documentation for the
- Which employees are eligible to participate in the retirement plan;
- What contributions the employer/church will make on behalf of employees;
- Whether the church/organization will use the CGGC Pension Plan as the sole provider for the plan or allow multiple plan providers? (A decision to allow multiple providers will require the church/organization to enter into arrangements to share information with all approved providers as well as assume responsibility to work with each provider to achieve plan compliance.)
With respect to the
Although the deadline for adopting a written plan document is not until December 31, 2009, the plan's effective administration date is January 1, 2009. Therefore, all employers are encouraged to complete their retirement plan documentation as soon as possible. An organization that is not in compliance with its written plan document effective January 1, 2009 could be subjected to taxes and penalties by the IRS.
- Review plan terms. As can be expected, the IRS requires that your organization administer its 403(b) plan in the way it is written. This dovetails with the earlier point that the employer must maintain a written plan that meets certain legal standards. The plan must have all the right provisions and those provisions must be followed. Disregarding this requirement is deemed an “operational failure.” Certain failures by the employer in following the plan could adversely affect every individual for which the failure occurred and/or all of the employers’ plan participants.
That’s really all your church/organization has to do right now to get into compliance with the new requirements if the CGGC Pension Plan is the sole 403(b) provider!
- If your church/organization allows employees to choose among more than one 403(b) provider, you will also have to become familiar with the new contract exchange and plan-to-plan transfer requirements. Participants, employers and plan providers have more steps to complete if your church/organization allows plan participants to move or transfer money from one provider to another. In the past, this sort of money transfer was called a “90-24 transfer.” Effective September 25, 2007, 90-24 transfers no longer exist.
The new mechanisms for moving money in these multi-provider plan situations are called “plan-to-plan transfers” or “contract exchanges”. Money can still be moved, but there are now some new requirements if money is moved between two different 403(b) providers.
A plan-to-plan transfer is the movement of retirement assets between two different 403(b) plans. This can happen if the church/organization uses multiple 403(b) providers under separate plans. A contract exchange is a movement of retirement assets between a 403(b) investment provider (with a payroll slot) and a 403(b) vendor (who does not occupy a payroll slot) within the same plan. To perform a contract exchange now, the employer and the provider receiving the 403(b) money must enter into an agreement to exchange required information related to compliance with the 403(b) requirements. These types of exchanges and transfers present some new accountabilities and challenges. For example, employers will need to establish arrangements with each provider documenting responsibility for sharing information when participants move money between 403(b) providers.
It is important to note that any movement of funds made from one 403(b) provider to another after September 24, 2007 is subject to the new provisions. This is not a problem if the Board of Pensions is the only 403(b) provider. But if your church/organization has made contributions to other 403(b) providers, it is possible that transfers have been made from funds held by these other providers. Your church/organization will need to check with the other 403(b) providers to determine if any transfers were made after September 24, 2007
- Participants can still make transfers and exchanges among different investment funds.
These new rules do not affect investment exchanges. Thus, if the CGGC Pension Plan is the sole retirement plan of the employer, changing investments continues to be a simple matter. The Church of God Pension Plan offers a wide-range of investment options and a participant investment change within the plan is a simple transaction submitted by the employee via an online login to their account.
Plans that use the Board of Pensions as their sole provider will see minimal impact from this new regulation. Note: The Churches of God, General Conference Pension Plan will allow amounts to be transferred into the Plan from other 403(b) providers but does not permit transfers or contract exchanges to be made out of the Plan. That means that amounts contributed to the Church of God Pension Plan must remain in the Plan until the participant is entitled to receive a distribution.
Do the regulations address the time frame in which a participant’s elective deferral must be sent to the provider?
Yes. The general rule under the final regulations is that all contributions must be made to the provider within “a period that is not longer than is reasonable for the proper administration of the plan.” The regulations indicate that employee elective deferral contributions should be deposited in an administratively feasible period, typically within 15 business days following the month in which these amounts would have been paid to the employee if they had not been deferred. The key thought is that the IRS is seeking to ensure that contributions are properly and efficiently handled by the employer from the point of withholding to the point of contribution to the plan.