I think the rules of Scrabble should be changed to allow acronyms. We have all been there at least once in our lives – in the midst of a heated moment with friends or family, exchanging furious verbal battles over whether the word they have just put down in a game of Scrabble is in fact allowed. One of the Scrabble rules listed as causing the most arguments is the banned use of acronyms, which many of the leftover, high point letters can be used. However, in the Church and government world, acronyms are not frowned upon, in fact they are used more frequently than not.
In the Catholic Church business community, we use acronyms such as RCRI (Resource Center for Religious Institutes), DFMC (Diocesan Fiscal Management Conference) and NACPA (National Association of Church Personnel Administrators), just to name a few. In the government world, we have the IRS (Internal Revenue Service) and the DOL (Department of Labor), the two main overseers of retirement plans. The IRC (Internal Revenue Code) discusses non-discrimination testing requirements. The two main tests are referred to as ADP (Average Deferral Percentage) and ACP (Average Contribution Percentage) testing. Many employers and retirement vendors are unaware that non-discrimination testing in a 403(b) church plan is different from other types of plans. The testing requirements depend on the type of church organization.
|Guide to Acronyms|
|The Resource Center for Religious Institutes||RCRI|
|Diocesan Fiscal Management Center||DFMC|
|National Association of Church Personnel Administrators||NACPA|
|Internal Revenue Service||IRS|
|United States Department of Labor||DOL|
|Internal Revenue Code||IRC|
|Average Deferral Percentage||ADP|
|Average Contribution Percentage||ACP|
|Qualified Church Controlled Organization||QCCO|
In a 403(b) church plan, a Qualified Church Controlled Organization (QCCO) is not subject to non-discrimination testing requirements. A QCCO is defined as an organization that receives less than 25 percent of its support from the sales of goods or services, or from government support. Churches, elementary schools and high schools are specifically deemed QCCOs. These organizations are not subject to non-discrimination testing.
A non-Qualified Church Controlled Organization (non-QCCO) is a church organization that offers goods or services to the general public and receives 25 percent or more of their support from sales of goods or services, or from the government. Typically, a non-QCCO would be a hospital or university. Other organizations can meet this definition such as nursing homes and St. Vincent DePaul stores. Non-QCCOs are not subject to ADP testing, but are subject to what is referred to as the universal availability requirement, which simply means the plan must be offered to all eligible employees. A non-QCCO is subject to ACP testing; however, these tests can possibly be avoided by a proper plan design.
When designing a 403(b) church plan, here are a few key elements to consider: determine what type your organization is – QCCO or non-QCCO; what testing applies to your plan, if any; is there a possibility to design the plan to avoid testing and if subject to testing, who will perform the tests and how much will they cost? As you can see, it is extremely important when searching for a 403(b) plan vendor, to hire an organization with an extensive knowledge of church plans.
With this in mind, it’s much easier to win with a 403(b) plan vendor than it is in a game of Scrabble without using acronyms. In Scrabble, if acronyms were allowed, ‘QCCO’ is worth 17 points, in a 403(b) plan, vendor knowledge and experience are priceless.
For more information on designing a 403(b) retirement savings plan, contact Jim Ceplecha at 800.807.0100 x 2630.