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Selecting the Right Retirement Plan for your Church

Have you heard of the 403(b)(9) plan? This type of plan, as opposed to an IRA, 403(b), 403(b)(7) or a 401(k) plan, has two key benefits for ministers described in greater detail below. Many churches are using one of the other categories of plans as opposed to the more advantageous 403(b)(9). There are multiple reasons for this. Typically, the retirement plan vendor of choice is either a local financial representative who does not specialize in church retirement plans, although they may be excellent personal financial advisors. Another driver for using the less desirable options is when the Finance Committee or the Chairman of the Board champions the kind of retirement plan they have at his or her company or place of employment.

As mentioned above, there are two key benefits for Ministers when using a 403(b)(9) plan:

  1. Most contributions to church retirement plans of any type are pre-tax. This means that taxes will be paid when distributions from the plan take place. There are no taxes on these distributions during retirement if the type of retirement plan selected is a 403(b)(9) church plan. The distributions may be taken out as part or as all of a minister’s retirement housing allowance.
  2. Voluntary contributions by ministers licensed, ordained or commissioned to a 403(b)(9) church plan have three tax saving benefits:
    • The contribution is pre-state tax (key savings).
    • The contribution is pre-federal tax (key savings).
    • The contribution is pre-SECA tax (an additional 15.3% tax savings if the minister did not opt out of Social Security).

The bottom line is that the 403(b)(9) plan has unique benefits for ministers and the others do not. Further, in contrast with a 401(k) plan, the 403(b)(9) plan is less expensive to administer and does not require any discrimination or other kind of testing. There is no Form 5500 to transmit to the IRS as it is not an ERISA plan, therefore, saving the cost of an audit, form preparation, and testing requirements.

Within the last year, the IRS established a process for having a 403(b)(9) plan document pre-approved. While it can be expensive, it is important to have a vendor for your plan with IRS approved plan documents. The benefit is that when your plan is audited, your plan documents are pre-approved.

When a minister with monies in a 403(b)(9) plan is ready to take distributions after retirement, they determine the amount of their housing allowance just as they did prior to retirement. In the best case, the service provider of the retirement plan will be authorized to oversee the process and distribute the funds without tax, up to the amount of the housing allowance.

If your church has a retirement plan, check the plan type immediately. If your church does not have a plan, be sure to select a knowledgeable vendor and the correct plan type.

Talk with your CPAs and tax preparers about this benefit at tax time. If your tax preparer is not an expert in clergy taxation, they may attempt to claim the housing allowance when the distribution comes from a non-conforming plan type.

For more information please consult with your Wegner professional, or go to the website, There you will find additional information on this subject. Envoy Financial provides 403(b)(9) church plans for thousands of churches across the country. They also provide the other types of retirement plans for organizations that require ERISA compliant documents and services.

Bruce Bruinsma is the CEO of Envoy Financial. He can be reached at 888-879-1376 or


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