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RETIREMENT AND LIFE INSURANCE SOLUTIONS FOR YOUR RELIGIOUS ORGANIZATION
Setting up a 403(b)(9) 403(b)(9) plans, or “religious retirement” plans, are non-ERISA defined benefit retirement plans specifically designed to meet the needs of faith-based organizations, or those with 501(c)(3) status. Its fundamental difference from a 403(b) is, in consideration for the long-term needs of your organization's leadership, it offers a unique provision in which retired leaders can take distributions designated as a tax-free housing allowance within legal limits. All employees are eligible to participate 403(b)(9) plans, however, the employer has flexibility in deciding to which employees they will offer the plan and employer contributions are optional.
403(b)(9) Benefits
Employers
Administration is easy These plans do not fall under ERISA regulations, which require tax-deferred accounts undergo periodic reviews known as discrimination testing. This saves the cost of an audit, form preparation and testing requirements.
Offering is flexible You decide whether to make the plan universally availability or choose which employees may participate in the plan. For example, you may impose age and/or service requirements before an employee can participate in the plan.
Contributions are optional You decide to make matching contributions, discretionary contributions or none at all.
Participating Employees
Tax advantages Employer contributions are neither subject to Social Security tax nor income tax at the time of contribution. Participant contributions are also pre-tax and earnings on all contributions, including rollovers, are tax deferred.
Ordained, Licensed or Commissioned Minister Employees
Tax advantages Employee contributions are neither subject to Social Security tax or income tax. They are made pre-SECA (Self-Employed Contributions Act) tax—a 15.3% tax savings.
Housing allowance Employees can take non-taxable distributions for housing allowance in retirement. Starting at age 59½, funds withdrawn and used for allowable housing related expenses are excluded from income in that year and therefore not subject to federal income tax. (This assumes the ordained, licensed or commissioned minister-employee is not still living in church-provided housing and/or being reimbursed for housing expenses.)
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Examples of tax-free housing allowance expenses are
• Mortgage payments (principal and interest)
• Rent payments (if you rent instead of own)
• Real estate taxes
• Property insurance
• Utilities (gas, electric, water, sewer, trash pick-up, local phone service)
• Appliances and furniture (purchases/rental costs and repair)
• Remodeling expenses
• Homeowners Association dues
• Pest control
The IRS does impose limitations on the total dollar amount of expenses excluded from tax obligation
Annuity products with guaranteed income for life help your employees achieve their retirement dreams.
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