As discussed below, even though a church plan was operated in accordance with ERISA and the plan sponsor may have thought it was required to do so, as long as no 410(d) election was made, it is “no harm, no foul” for the plan’s status as a church plan.
In 1975, a mere 42 years ago, Congress enacted Section 301 of the Tax Reduction Act of 1975 authorizing a tax-credit driven employee stock ownership plan known as a TRASOP – Tax Reduction Act Stock Ownership Plan. An employer that adopted a TRASOP could claim an extended investment tax credit against its federal income taxes equal to an amount it contributed to an employee stock ownership plan in stock, or cash that was used to purchase its stock. The plan had to abide by special, strict vesting and distribution rules. Thus, the TRASOP credit was designed to encourage the purchase of qualified property — mainly equipment and machinery — while at the same time providing a benefit to employees.
The U.S. Department of Labor recently issued a proposed prohibited transaction exemption allowing privately held conglomerate ABARTA to contribute real property to its defined benefit plan and simultaneously lease back the property.