Church group client has overfunded DB plan they want to convert to cash balance. Plan is overfunded. To sweeten conversion, they want to set up a 401(k) plan but make matching contributions to a 414(k) account in the (converted) cash balance plan, using the excess assets. PLR 9723033 addresses the issue for an apparently for-profit plan sponsor, but some of the analysis wouldn't apply to a church group.

Any ideas? Their backup plan is to take a reversion and contribute 100% to the 401(k) plan as pre-funded match, since they don't think they're subject to 404 limits or 4980 excise tax.

You may want to check in the 401(k) Regs. I'm not sure of the exact cite, but there is a Reg. that states that no db accrual can be tied to participation/deferrals in a 401(k) Plan. I don't know if your church group would be exempt. Since your cash balance plan is a db plan, you should check this cite before proceding.