Why 403(b)(9) Plans Are Ideal for Churches

Are you looking for a retirement plan for your church and are unsure where to start? You’re not alone.

Many advisors and plan providers may suggest an IRA, 401(k), 403(b), or 403(b)(7) for your church retirement plan. However, there’s another retirement plan — that many advisors and plan providers do not specialize in — called the 403(b)(9) retirement plan.

403(b)(9) retirement plans are defined contributions plans designed for the specific needs of churches or those with 501(c)(3) church status. This means that there are a few distinctions that make the 403(b)(9) retirement plan ideal for churches.

But before we get into those distinctions, let’s go over 403(b)(9) retirement plan eligibility. In other words, how do you know if your church is eligible for a 403(b)(9) plan?

Who is Eligible for 403b9 Church Retirement Plans?

If you’re an employee of a church or church-related organization, you’re eligible to participate in a 403(b)(9) church retirement plan.

However, for 403(b)(9) plans, the employer has the flexibility to determine eligibility. This means they can decide who participates in the plan by establishing restrictions, such as age or years of service. If your employer has a 403(b)(9) plan, check to see if there are any eligibility restrictions.

Ok, now let’s get into the specific distinctions of 403(b)(9) retirement plans that make them ideal for churches.


Benefits of 403(b)(9) Retirement Plans for Churches


Participation Flexibility

We already talked a little bit about the flexibility employers have with a 403(b)(9) plan. Unlike a 403(b) plan that is restricted to universal availability, 403(b)(9) plans allow the employer to choose who can participate in the plan (based on certain requirements).

Housing Allowance

One of the biggest benefits of a 403(b)(9) plan is the Minister’s Housing Allowance. This is a tax-saving feature that allows ministers to exclude a part of their gross income — which is spent on housing expenses — from their income taxes.

Housing Allowance in Retirement

Not only can ministers make tax-free contributions to their retirement plan, but they can also take tax-free distributions in retirement for the amount of the housing allowance.

Check out this post to learn more about Housing Allowance.

Other Tax Savings

When you receive a portion of your compensation as housing allowance, you do not have to pay federal or state taxes on it. But, if self-employment taxes apply to you, you will have to pay those.

However, when you take a portion of your housing allowance and contribute it to your retirement plan, these contributions are made pre-SECA tax. SECA taxes are 15.3%, which means you will get a 15.3% tax savings for every pre-tax contribution you make.

Not Subject to ERISA and Less Expensive

403(b)(9) Church Plan are considered non-ERISA, meaning they are not subject to ERISA requirements. Non-ERISA plans do not have to file Form 5500, resulting in no annual audits for plans over 100 participants, discrimination testing, or form preparation. This saves both cost and time.

Check out this post to learn more about ERISA vs. Non-ERISA plans.

The Bottom Line

The unique benefits of 403(b)(9) plans for churches make it an obvious choice for churches.

At TruthPoint Financial, we provide retirement plan options that are consistent with your organization’s financial goals, and we walk with you through every step of the process. But more than that, we provide service that is built on truth, transparency, and trust. And we provide personal, authentic service that is always upfront and honest.

Contact us today for a personal, one-on-one conversation about your retirement planning needs and how we can provide a solution.

To continue to receive great value on retirement planning, connect with us on LinkedIn.

Are you searching for a new retirement plan provider or advisor? How do you know which one is best for the needs of your organization?

We’ve put together 6 red flags that you should be aware of when looking for a retirement plan provider. You’ll receive a new email every day that will give you common red flags you should stay clear of so you can make the best retirement provider decision for your organization.

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