SECURE Act: Church-Controlled Organizations: Clarification of Retirement Income Account Rules Under the Secure Act

Section 111 of the Setting Every Community Up for Retirement Enhancement (SECURE) Act clarifies who may be covered under retirement plans that are maintained by church-controlled organizations. But what exactly is a “church-controlled organization?”

According to the IRS, church-controlled organizations can be considered either qualified or nonqualified. A qualified church-controlled organization (QCCO) is also considered to be a church-controlled 501(c)(3) tax-exempt organization, and typically does not offer any type of services or goods for sale to the public. They have less than 25% of all financial support coming from government grants or from goods and services that derive from business activity. Examples of QCCOs are seminaries, General Assembly agencies and entities, churches, and church-related primary and secondary schools.

A nonqualified church-controlled organization (NQCCO) refers to a tax-exempt organization that offers goods, services and facilities for sale. They’ll normally have more than 25% of all revenue coming from government sources or the sale of goods or services. Examples of NQCCOs are church-affiliated hospitals, universities, children’s homes and retirement housing facilities.

Before the enactment of the SECURE Act, the IRS opined that certain NQCCOs – including church-related nursing homes, daycare centers, summer camps, preschools, colleges, universities, hospitals and other social service organizations – shouldn’t sponsor church retirement income plans under Section 403(b)(9) of the Internal Revenue Code. As a result, employees of these NQCCOs stood to lose access to such plans.

The SECURE Act clarifies who may be covered under plans maintained by church-controlled organizations. It includes the following:

  • Duly ordained, commissioned or licensed ministers, regardless of the source of compensation;
  • Employees of tax-exempt organizations controlled by or associated with a church or a convention or association of churches; and
  • Certain employees who separate from service with a church, a convention or association of churches or an organization described above.

Interested in learning more about the SECURE Act? Download the SECURE Act eBook from the Schneider Downs Retirement Solutions team for a full overview of provisions and highlights at www.schneiderdowns.com/secure-act-ebook.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2020 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on

The Cares Act and Its Effect on Retirement Plans
The Impact of COVID-19 on Your 401(k)
SECURE Act: Treating Excluded Difficulty of Care Payments as Compensation for Determining Retirement Contribution Limitations
SECURE Act: Benefits for Volunteer Firefighters and Emergency Medical Responders
SECURE Act: Benefits for Volunteer Firefighters and Emergency Medical Responders
SECURE Act: Increase in Penalty for Failure to File (Section 402)

Register to receive our weekly newsletter with our most recent columns and insights.

Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us

contact us

Map of Pittsburgh Office
Pittsburgh

One PPG Place, Suite 1700
Pittsburgh, PA 15222

contactsd@schneiderdowns.com
p:412.261.3644     f:412.261.4876

Map of Columbus Office
Columbus

65 East State Street, Suite 2000
Columbus, OH 43215

contactsd@schneiderdowns.com
p:614.621.4060     f:614.621.4062

Map of Washington Office
Washington, D.C.

1660 International Drive, Suite 600
McLean, VA 22102