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April 22, 2021

What Exactly is a Church Retirement Plan?

By Beth Knight-Pinneo, Alliance Benefits

A church retirement plan is a defined contribution plan specifically designed for the unique needs of churches or church organizations. In addition, a church retirement plan offers retired ministers the ability to have retirement distributions designated as housing allowance. After working with Alliance Benefits for over 20 years, I’m usually not surprised by the questions we receive. However, it does still surprise me when I hear churches or Alliance employers ask, “Does the Alliance have a retirement plan?” The answer is yes!

We offer the Christian and Missionary Alliance 403(b) Retirement Plan, and if you are an Alliance church or other affiliated Alliance employer, you are eligible to enroll your employees!

We do not charge fees to you as the employer, and the fees charged to participants (out of their account balance) are competitive compared to most other plans.

Since the Alliance plan is a 403(b)(9) “Church Plan,” it is not generally subject to nondiscrimination rules like other retirement plans would be. A church can choose which employees are eligible or even specify match levels for categories of employees. The plan allows you to enroll any W-2 employee paid to work 20+ hours per week. Each church can state on your 403(b) Adoption Agreement if you have stricter eligibility rules for your employees, such as 40 hours per week or a certain length of service.

The Alliance 403(b) plan does require a minimum match for employers, which is the lesser of 50% of the employee’s contribution, or 3% of the employee’s total gross pay, including housing allowance.

Many of our churches prefer to offer a more generous match or even provide additional discretionary employer contributions. We have no required minimum for the employee, and the only maximums for employee or employer are those set by the IRS, which are quite high.

Churches and employees should be aware that most financial planners suggest saving 15% for retirement. We encourage people to start where they can and regularly review their contributions while working toward their retirement goals.

Because the IRS recognizes us as a “Church Plan,” the Alliance plan offers another unique feature: under current IRS rules, retired Alliance Official Workers can claim their withdrawals as Retiree Housing Allowance.

How does this work? Let’s say a retired Official Worker takes $1,000 per month out of their Alliance 403(b) and has $1,000 housing expenses and a fair market rental value of $1,000 or more. In that case, the withdrawal is non-taxable income for them. (They can receive back part or all of their federal withholding on withdrawals when filing their taxes.) This tax advantage can’t be claimed on withdrawals from an IRA or other types of plans.

By now, I’ll be surprised if some of you aren’t wondering, “How can I set up this great retirement plan for my pastor?”

You can start by getting this New Employer Checklist in the hands of your church treasurer. If you have questions about the forms, we’ll be happy to help. You can reach us by calling (800) 700-2651 or by emailing retirement@cmalliance.org.

Beth joined Alliance Benefits in January 2001. In her role as Benefits Consultant, she focuses on building relationships with churches and districts, and assisting with health and 403(b) retirement plan questions. She is assigned to serve the churches and districts in the Western and Southern US, and the multi-cultural districts.


Posted in: 403(b) Plan Tools