Discretionary Contributions to Church 403(b)s

Q. A 501(c)3 ministry is setting up a new 403(b) plan and wants to give a discretionary contribution, once a year, to the director of the center. It doesn’t want to give any contributions to any of the other employees who may want to participate in the 403(b) plan. Would they be required to also contribute to all employees?

A. You are correct that a church plan is not subject to many of the rules that apply to other 403(b) 501(c)(3) organizations. However, you also need to first ask if they are (1) a church; (2) a QCCO (qualified church-controlled organization); or (3) a nonQCCO (nonqualified church-controlled organization). #1 and #2 are not subject to any nondiscrimination rules, so the contribution could be structured in the way you describe and indicate who is eligible for the employer contribution. If the organization is a nonQCCO then nondiscrimination tests apply and it would need to cover anyone who meets the eligibility criteria under the plan.