Frequently Asked Questions
Answers to any questions you may have about your benefits.
Answers to any questions you may have about your benefits.
Participants who are concerned by market fluctuations are always welcome to call our 403(b) plan consultants at Steadfast Wealth Co. to ask whether your investment options are set up to your best advantage. Send your question or request to [email protected], and one of their associates will be in touch with you shortly. They look forward to connecting with you! There is no additional charge to you for this valuable service.
Our C&MA 403(b) plan offers you either a Roth “After Tax” option or the traditional “Before Tax” option. The Roth option may be a great tax advantage for some pastors, while others may be best served by the traditional option. If you are considering a Roth, here is an overview.
Pay Now or Pay Later:
When you contribute as Roth to your C&MA 403(b), your employee contribution is withheld after taxes. You are paying the tax up front; your employee contributions are taken out tax-free after you retire.
With the traditional Before Tax 403(b) contributions, your employee contribution is withheld before taxes. This reduces your taxable income today. When you take the money out at retirement, it would be taxable income then. However, keep in mind that currently the IRS allows C&MA retired ministers to designate distributions from the C&MA 403(b) as ministerial housing allowance up to the IRS guidelines, making it non-taxable income.
Is this the same as a Roth IRA?
No, when you contribute to your C&MA 403(b) with the Roth option, you are allowed to contribute up to $18,000 per tax year (or $24,000 if you are over age 50). The limits for a Roth IRA are much lower.
Is the Employer Contribution Roth also?
No, regardless of whether you choose Before Tax or Roth for your employee contributions, the employer portion will always be considered Before Tax. This means it will be taxable income at retirement.
Where Can I Learn More?
You can access many helpful resources when you log in to your account on Empower Retirement’s website. After you log in, click on “Education” near the bottom left of your home page, then select “Roth.” You will find several helpful resources, including a Roth calculator and a presentation with audio.
Which is Right for Me?
One point to consider is whether you need the tax advantage today, or if you will need the tax advantage more at retirement. Some employees rely on Before Tax 403(b) contributions in order to reduce their current taxable income. Another point to evaluate is whether your personal tax rate will be lower today, or at the time of your retirement.
If you would like professional advice on your investment options, please email our consultants at [email protected]. An associate will be in touch with you shortly.
There is no additional charge to you for this service.
You should always discuss any retirement decisions or concerns with your tax and financial advisers.
Setting up 403(b) contributions for your employees is an important benefit that provides great value to your employees as they look toward future retirement with a growing account.
It’s vital to keep everyone in the loop regularly in order to avoid any costly mistakes or tax errors. If you are using a payroll service, be sure to copy them on 403(b) contribution information given to Alliance Benefits – and vice versa. It’s particularly important to keep Alliance Benefits (and your payroll service) informed of any changes to:
The church or employee may make changes at any time throughout the year – just be sure to complete the needed forms and copy all parties.
Here is an overview of the basic steps Treasurers should follow:
One of the unique benefits of the C&MA 403(b) Retirement Plan is that official workers may be eligible to reduce taxable income, even after retirement. Currently, the IRS allows retired C&MA official workers to designate their withdrawals from the C&MA 403(b) plan as housing allowance. This benefit to retired official workers is only available through a retirement plan recognized by the IRS as a church 403(b)(9) plan. Most other retirement plans, even other 403(b) plans or IRAs, cannot offer this tax advantage.
Retired official workers may claim the lesser of the following as non-taxable income:
It is the retired minister’s responsibility to justify the amount used as housing allowance if ever questioned by the Internal Revenue Service.
Alliance Benefits issues a general letter to retired official workers each January stating that up to 100% of withdrawals from the C&MA 403(b) Plan may be designated as housing allowance.
When making withdrawals from Empower Retirement, Empower will withhold 20% federal tax, even if the retiree is eligible for housing allowance. Retirees who are eligible for housing allowance may receive back any applicable portion of the withholding when filing their taxes, based on their overall tax situation.
What Housing Costs Are Allowed?
Generally retired official workers may include most reasonable housing allowance expenses, such as a down payment on a home, rent or mortgage payments, home equity loan payments (if loan used for housing-related expenses), real estate taxes, property insurance, utilities, furnishings and appliances (including repairs), structural repairs, remodeling, yard maintenance and improvements, pest control, snow removal, maintenance items, and trash pickup. Housing-related expenses can only be included in the housing allowance for the year in which they are incurred.
These rules apply for current C&MA retired official workers. Please contact Alliance Benefits in the year you retire, to verify current rules.
This is general information and is not intended as legal or tax advice. Please consult your tax attorney or accountant regarding your particular situation.
Participants age 70.5 or older should receive an annual mailing from Empower Retirement regarding the Required Minimum Distribution (RMD) rules.
If you are still employed full-time with a C&MA church or other C&MA employer, you do not need to begin taking the Required Minimum Distribution from your C&MA 403(b) Plan until you retire. Since the C&MA is blessed to have many workers who continue serving well into their 70s or beyond, this question comes up frequently.
You are required by the IRS to begin taking the required minimum from your C&MA 403(b) account, either when you turn age 70.5, or when you retire from the C&MA, whichever is later.
If you are still employed by the C&MA full-time, you do not have to complete the Automated Minimum Distribution form received from Empower, or take any other action with the mailing.
However, since the IRS imposes a hefty 50% penalty for non-compliance, this is something you will want to carefully note for the future when you do retire, even if it does not apply to you yet.
Be sure to keep your address updated on your C&MA 403(b) account so you will receive statements and legal notices. You may e-mail address changes to [email protected].
By the way, this information pertains only to your C&MA 403(b) account. If you have other retirement accounts elsewhere, please check with each one about the RMD rules, since different types of plans have different rules. For example, someone age 70.5 must begin taking the Required Minimum Distribution from a Traditional IRA, whether they are retired or not.
If you have technical questions on how the Required Minimum Distribution is calculated, please call Empower Retirement at 866-467-7756.
For more information on the C&MA 403(b) Plan, you may visit www.alliancebenefits.org or call 800-700-2651, Option 2.
By Bob Simison, HCMS Group
When I first heard about health savings accounts (HSAs), I was the health editor for a big business news organization. “This will never work, and I wouldn’t want any part of it,” I thought. Why should I? My fabulously wealthy employer’s health plan paid for EVERYTHING – without any employee premium contribution.
Now I face the same realities as the rest of America. Healthcare costs are out of control, employers’ compensation budgets can’t keep up, and something has to change. Research by HCMS, a partner of Alliance Benefits, that combines advanced health analytics with the KnovaSolutions clinical prevention service, shows that high deductible health plans with an HSA can lower total healthcare costs and slow the rate of premium increases without compromising access to healthcare.
That’s partly because this combination is designed to make us all better consumers. Money in the HSA is there to help cover the high deductible, and the less of it you spend on each encounter with the healthcare system, the farther it will go. My wife and I recently joined the HCMS health plan, which has high deductibles and an HSA similar to those under the new Alliance Benefits program.
And I can tell you, in the first three months it’s already changing our behavior as consumers. For example, I have to go for a monthly blood test to monitor a medication. Under my old insurance, I could have the test at my primary care office and pay just $25. It was quick, efficient, and convenient. But I didn’t know the provider was billing the insurance company $114 and collecting $95 after discounts. Now the $95 is coming out of my HSA!
So I checked around and found out that the local hospital lab would do the test for $33. If I pay with my HSA card, they’ll charge just $16.50. I can save $78.50 a month!
The other thing about the HSA is that it is generally funded with pre-tax dollars, giving you more bang for your buck. My wife goes to an out-of-network doctor for physical treatment. He charges $180 a visit. Under our old plan, we paid the full $180 until we met the out-of-network deductible. In addition to paying the doctor, we had to pay taxes on the $180. Under the new plan, we still have to pay the doctor $180 a session, but we don’t have to pay Uncle Sam too, because we’re using pre-tax dollars from our HSA.
That’s how the HSA plan is working in our favor so far. One attractive feature is that if you don’t use the money, it will sit there and grow tax-free until you need it next year or the year after or maybe sometime far in the future. And you can take the balance with you if you change employers. But honestly, our health isn’t perfect, and we’re finishing the first three months with approximately $0.00 left in our HSA (it gets replenished with payroll deductions every month). KnovaSolutions nurses say many people are in that boat, where it’s hard to get ahead and build up a balance. For those of us in this situation, we should consider making additional HSA contributions on top of our employer’s contribution so we can accumulate a balance for future needs.
Another challenge is when you have a condition requiring a really expensive drug. Three months of Humira injections for Crohn disease may cost $13,680, and three months of Enbrel for rheumatoid arthritis, $13,440. (The TV ads don’t tell you that.) Under the Alliance plan, in most cases the first $6,000 ($4,000 family deductible plus an additional $2,000 for individual co-insurance) comes out of your pocket. That’s a lot, unless you have it in your HSA – a good incentive for saving up. After that, you’ve met the individual out-of-pocket maximum for the year and everything else is fully covered, although you’ll have to keep paying healthcare bills for other family members until you hit $12,000 out of pocket.
This problem isn’t going away, and health plan design can’t resolve it. Here’s a video, The High Cost of Prescription Medicine, that helps explain why drug prices continue to soar.
If you would like help researching less expensive alternative treatments and information about specific websites that might help in lowering drug costs, please contact Alliance Benefits toll free at (800) 700-2651.
Bottom line, for most of us, putting as much money as we can into an HSA is one of the only ways to get an edge in today’s healthcare system. You can do your bit to cut healthcare waste by being a smarter consumer, you can cash in a tax break, and you may be able to set aside enough to keep a serious, expensive healthcare crisis from wiping you out. To learn more about HSAs, dive into this website: www.highmarkbcbs-hsa.com.
Bob Simison handles media and communications for HCMS Group. He previously worked as a journalist for The Wall Street Journal, The Detroit News, and Bloomberg News. At Bloomberg, he led the health and science team and ran numerous health-related investigative projects.
By Bob Simison, HCMS Group
As a continuation of our series on things you should know about in healthcare, I’d like to update you on the state of play in the health exchange market under the Affordable Care Act.
Question: Would it be beneficial to just send everyone to the health exchanges?
After all, it might be cheaper and less hassle. That way everyone could choose the right plan for themselves and their families. The ACA was intended to provide for lots of choices, price competition, and encouragement for us all to be better healthcare consumers, right?
Well, here’s the thing. The health exchanges aren’t working out that well for many consumers – or even health insurance companies. And they certainly aren’t cheaper. Here are some facts:
Think about that first point: 24 percent. That’s a massive increase. Why is this happening? Quite simply, the insurance companies’ pricing wasn’t right relative to the true costs of healthcare, and the exchanges drew in a more-costly pool of subscribers than expected.
One advantage to The Alliance Health Plan is that it is self-funded. This means the Plan is able to set premiums that realistically reflect costs, rather than absorbing the miscalculations of the overall insurance industry. Alliance Benefits is continuing to examine ways to keep its plan competitive and at the same time searching for cost containment options to help steer away from high percentage increases.
Alliance Benefits, with the assistance of its partners HCMS Group and Benefit Dynamics Company, is doing everything in its power to continue providing affordable solutions for our members, including a health plan that works. Thank you to those who have embraced the Alliance Benefits plan.
Bob Simison handles media and communications for HCMS Group. He previously worked as a journalist for The Wall Street Journal, The Detroit News, and Bloomberg News. At Bloomberg, he led the health and science team and ran numerous health-related investigative projects.
Approaching age 65, with many companies sending out mass amounts of Medicare documents and sales brochures, you may find yourself frozen between the stacks of information not knowing how to even begin on the Medicare path. We have great news for you! As a participant of the Alliance Health Plan, you do not have to walk this road alone. Not only is Alliance Benefits still here to help you, but we are also excited to announce our new partnership with Medicare Transition Services, licensed advisors available to you at no cost who will provide guidance, education, and assistance.
The first step is answering this question, “Am I required to enroll in Medicare if I am not retiring at age 65 since I already have coverage under my employer?” Employer size determines which medical plan will be your “primary payer” of medical claims. Therefore, the size of your employer determines whether the Alliance plan will require you to enroll in Medicare at age 65. The Alliance Health Plan is a multi-employer, church health plan. Each individual church/location on the health plan with an EIN/Tax ID number is considered an “Employer.”
If your C&MA employer has fewer than 20 employees (a “Small Employer” by Medicare guidelines) and you plan to remain enrolled in the Alliance Health Plan once you turn 65, the Alliance plan will require you to enroll in Medicare Part A (Hospital), B (Medical), and D (Prescription) on your eligibility date. Medicare coverage will become the primary payer of your medical claims ahead of the Alliance plan. Because the Alliance plan requires you to enroll in Medicare, your employer will receive discounts to the monthly premiums charged by Alliance Benefits.
If your C&MA employer has 20 or more employees (a “Large Employer” by Medicare guidelines), the Alliance plan does not require you to enroll in any part of Medicare because the Alliance Health Plan remains the primary payer of your medical claims. This is true even if you opt to enroll in Medicare while on your employer plan. It is very important to know that the medical portion of the Alliance Health Plan is considered “creditable” employer coverage, but our prescription plan is considered by Medicare as “non-creditable” coverage. You can still choose to postpone enrollment in Medicare. But because our prescription plan is non-creditable, Medicare Part D will charge you a penalty (a higher monthly premium) for prescription coverage in the future if you do not enroll when first eligible. Health Savings Account (HSA) contributions must stop once an employee is enrolled in any part of Medicare. Participants turning 65 who work for a Large Employer have the choice of (1) to enroll in Medicare Part D now and end eligibility for HSA contributions or (2) to postpone enrollment in Medicare Part D and pay a higher premium in the future to continue benefiting from Employer contributions to their HSA.
An employee of the C&MA must remain enrolled in the plan to continue covering a spouse and/or child(ren). Spouses on the Alliance Health Plan turning 65 are subject to the same rules for Medicare enrollment. Discounts are not available to spouses on the plan. The HSA offered with the Alliance Health Plan is solely owned by the employee. Spouse Medicare status does not affect the employee’s HSA eligibility to make and receive contributions. As long as you remain an eligible employee of the C&MA, you can continue coverage on the Alliance Health Plan at age 65 regardless of whether or not you are enrolled in Medicare.
Alliance Benefits has put together two documents you can also find on our website:
Frequently Asked Questions (FAQ) – Small Employer
Now available on our website is a Medicare Resources page which you can find by visiting alliancebenefits.org/resources/medicare. Included on this page are the Medicare Transition Services contact information, their “Medicare Guidebook,” and a link to their website which contains short videos and other educational resources.
The official site for Medicare is medicare.gov. Their website is full of helpful information including forms and resources. The “Medicare and You” handbook is available under the Resources section on their website. Pages 4–9 of “Medicare and You” contain easy-to-read descriptions of Medicare options, the parts of Medicare, and guidance on how to use the handbook to get started with Medicare. Throughout its pages, the handbook explains what Medicare covers, knowing your rights, and so much more.
For additional assistance from Alliance Benefits regarding Medicare and the Alliance Health Plan, please call Teresa Hunter at (800) 700-2651, press 1 and then 3, or email [email protected]. Thank you for allowing us to serve you. We are Better Together!
Posted by Eddie Swanson in Treasurer’s Update
Clergy compensation and benefits are reportable on IRS Form W-2, not on IRS Form 1099. Churches that report clergy as independent contractors may not provide qualified tax-free health coverage and other retirement benefits without inclusion as additional taxable compensation. Clergy income is reported in Box 1 of the W-2 with any voluntary federal tax withholding reported in Box 2. Because clergy are not subject to Social Security and Medicare taxes, Boxes 3 through 8 should be left blank. The housing allowance should not be included in the amount reported in Box 1 but should be reported in Box 14 (Other) and designated as Housing.
Social Security and Medicare taxes should be withheld and remitted for church employees who do not qualify as clergy. These tax amounts should be reported in Boxes 3 through 6 of the W-2, and along with any amounts reported in Box 2, reconcile with the total of the quarterly amounts reported on IRS Form 941. Churches do not have the option of treating clergy as regular employees for reporting Social Security and Medicare taxes.
403(b) contributions made by clergy and other church employees are reported in Box 12 with Code E for pre-tax contributions and Code BB for after-tax Roth contributions. The matching church contribution is not included in the amount reported in Box 12.
Health premiums paid by the church are reported in Box 12 with Code DD. For churches participating in the Alliance Benefits Health Plan, a portion of the health premium is reported separately as a Health Savings Account (HSA) contribution in Box 12 with Code W. Employee-only coverage through Alliance Benefits includes a $1,000 HSA annual contribution, and other coverages include a $2,000 HSA annual contribution.