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Church Employees and EINs

Q. Suppose there is a church plan employer that consists of the following:

  • a steeple church that allows ministers to defer on self-employment income;
  • a pre-school through grade 12 school; and
  • a bookstore.

It is our understanding that a steeple church that allows ministers to defer on self-employment income needs to offer a 403(b)(9) plan, and that the school employees and bookstore employees would need to be on “regular” 403(b) plan. However, some questions arise regarding what happens if all employees are paid under the same employer identification number (EIN).

  1. Are they all church employees for plan purposes, even though some employees work at the school or bookstore?
  2. Are “pre-school” employees qualified church-controlled organization (QCCO) or non-QCCO employees? Does it matter if the pre-school is part of a k-12 school or if the church just has a pre-school?
  3. What if the pre-school through grade 12 has a separate EIN from the church?
  4. Making an assumption that the pre-school employees are non-QCCO, do those employees have to be separated from the k-12 employees for plan purposes?
  5. What happens if an employee works at the pre-school part of the day, and the k-12 school the other part of the day?
  6. Again, assuming all employees are paid under the same EIN, and the steeple church does not have ministers who defer on self-employment income and the church has a school, is the school considered part of the steeple church, or is the school a QCCO that needs to be listed as a separate participating employer, even though it doesn’t have a separate EIN from the church?

A. First, it doesn’t matter whether they affiliated church organizations are under one EIN or not. The distinction needs first to be made as to whether any of these are QCCOs or non-QCCOs. Basically, that means that if more than 25% of the funding comes from non-church resources, then it is a non-QCCO.

Second, effective with the new 403(b) documents only “steeple churches” can participate in a 403(b)(9) plan. Self-employed ministers also must use a 403(b)(9) (Although there is a potential fix in the works for this one).

The QCCOs and nonQCCOs must be covered under a 403(b) that is not a 403 (b)(9), although many document providers have what is referred to as a 403(b) for religious organizations which will include other special rules for church organizations.

If the organizations share employees then the portion of their compensation attributable to that entity will be recorded as a contribution under that entity. This would be especially important if there are QCCOs and non-QCCOs in the 403(b) for religious organizations, since the non-QCCOs will have nondiscrimination rules and the QCCOs will not.