October 2022 Blog: What is a 403(B)(9) Retirement Plan?

What is a 403(B)(9) Retirement Plan? 

In this article, Brad Brown from Plan A Wealth Management gives a wonderful insight into why ministries might consider choosing a 403(B)(9) retirement plan.   

What is a 403(B)(9) Retirement Plan? 

  • You may already know what a 403(b) retirement plan is and why you might choose it over a 401(k) plan. But do you know what a 403(b)(9) plan is? How do you know if it’s right for your ministry? 

 
Simply stated, 403(b)(9) plans are for churches, or those with 501(c)(3) church status, while 403(b) and 403b(7) plans are for everyone else.  

  • There is no reason to use a 401(k) plan when you are a non-profit 501(c)(3)—church or not. 

What Are the Benefits of a 403(b)(9) Plan? 

  • One of the biggest benefits of 403(b)(9) plans is that they offer the Minister’s Housing Allowance distribution at retirement. This allows a minister who is ordained, licensed, or commissioned to receive a designated portion of their salary that is excluded from gross income and not subject to federal income tax. 

Most plan sponsors are not aware of this specific rule that gives the minister to a 403(b)(9) church plan these tax-saving benefits: 

  • All monies contributed are made pre-state tax 

  • All monies contributed are made pre-federal tax 

  • All monies contributed are made pre-SECA tax—a 15.3% tax savings 

 

403(b)(9) Plans are also not subject to certain ERISA requirements. 

  • The 403(b)(9) plan is less expensive to administer and requires less reporting and testing. These plans DO NOT fall under ERISA regulations, which requires that tax-deferred accounts undergo periodic reviews known as discrimination testing. This saves the cost of an audit, form preparation, and testing requirements.  

Not sure if you have a 501(c)(3) church status? 

  • Reference your determination letter from the IRS. This notification will state whether you are classified as a church under section 501(c)(3) of the Internal Revenue Code. 

 

The retirement plan you select could make a significant difference!  You want to make sure you have the best plan for your situation.  Our team at Plan A Wealth Management would love to visit with you and assist you with some recommendations for the best plan for your situation.  Please contact me, Brad Bryan at Plan A Wealth Management, 402-975-8008, or email me at Brad@planawm.com.    

 

Learn more about Church Retirement Plans

 

Copyright.?© 2022 American Church Group of Colorado, LLC. All rights reserved.?The information in this article is intended to help your ministry better understand issues of vulnerability and mitigate risks.? It does not constitute legal advice between an attorney and a client. If specific legal advice is required, your ministry is encouraged to consult with a local attorney.?Neither Brotherhood Mutual Insurance Company, American Church of Colorado, LLC, nor?the author assumes liability for reliance upon the information provided in this?article. 

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