Churches and clergy can take advantage of special provisions of the tax code that are not available to participants of other non-church plans. In general, a church plan can be established for a church or association of churches. Other entities, such as hospitals and entities that provide special services to certain church-controlled organizations may also be church plans.
Qualifying church plans are not subject to the reporting and disclosure requirements of ERISA. A church can, however, elect to be covered under DOL regulations. As a result of these exemptions, a qualifying church plan is not required to file a Form 5500s or provide summary plan descriptions ("SPDs") or summary annual reports ("SARs") to participants of the Plan.
In addition to the reduced requirements for reporting and disclosure, distributions from the Plan may receive special tax treatment. Section 107 of the Internal Revenue Code confirms that compensation applied to housing expenses may be excluded from income. These regulations extend use of the housing allowance to retired ministers by allowing these expenses to reduce the income tax liability for distributions received from a 403(b) plan.
Church plans require a full understanding of the IRS regulations that apply to these special programs. Both in the design and administration, PenServ can assist your church or church association in the development and on-going maintenance of these programs.