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.

Learn more about Church Retirement Plans.

How to promote Biblical financial stewardship to your staff

As a leader in your organization, it’s important for you to make sure that your employees are educated on being financially prepared for retirement. But how do you do this?

It can be difficult to help your staff become motivated about their future. But when you're able to encourage their saving by helping them understand the concept of their future funded ministry, saving begins to have a purpose and something that they can look forward to.   

Here is some encouragement you can give to your staff as you explain the importance of funding their retirement: 

Our calling to love and serve others doesn't end at age 65. 

We all have unique passions, abilities, and experiences that God wants to use in ALL seasons and stages of our lives. But these stages of life must be funded. We must save for that time when the paycheck stops but our call to ministry continues—what we call our future funded ministry.  

Let's Redefine Retirement. 

For most people, retirement is seen as a time during which you withdraw or cease from work. However, there is never a time in which we stop having value or influence in the lives of others.  In fact, God has created us to minister to others for a lifetime. "Future Funded Ministry" is a redefining of retirement where we as Christians embrace our lifetime calling to love, serve, and minister to others.  

You need to be prepared. Having passion alone is not enough. 

Free your future from the common financial constraints many today will face and instead prepare for a new season with the flexibility to do whatever God calls you to do. As Joseph prepared Egypt during the seasons of plenty for the time when they would have need, so we also prepare now for our future. 

What could you do in your last season? 

From starting a retreat home for missionaries to using horses to help those with special needs to traveling across the country and serving at RV parks, there are endless dreams people have embraced during their 4th quarter in life. 

Start praying and researching your future plans today. 


Learn more about what the Bible says about money and stewardship.

5 Retirement Tips Your Participants Need to Know

5 Retirement Tips Your Participants Need to Know

As a Christian, you are called by God to serve. This calling does not end when you stop receiving a paycheck.  Retirement is not only a reward for past service but a stepping-stone to future ministry. We call this your Future Funded Ministry! When you successfully construct and fund a retirement plan, you are creating a source of money to fund your future ministry activities. What an exciting way to live!

The Benefits of an IRA

IRAs are a great retirement savings option for small organization or individuals.

Many small employers, ministries, or faith-based organizations don’t have the money or experience to offer a retirement plan at all, let alone one with either a basic or matching contribution. This means you have to start your own retirement plan. Like the 403(b) or 401(k), an IRA can accommodate either traditional contributions (you save taxes now) or Roth contributions (you save taxes later).

How could an IRA benefit your employees?

For most young workers and some older ones (for example ministers that take advantage of Minister’s Housing Allowance to reduce their taxable income), a realistic and tax-free choice is to start a Roth IRA or a Roth 403(b). Contributions aren’t tax-deductible, but your employees can withdraw the principle from them tax free. As long as they wait until they’re age 59 1/2 to take withdrawals, earnings are tax-free too.

Some of the perks of an IRA include:

  • IRAs have much lower plan costs and annual fees.

  • Anyone, such as volunteer staff or individuals, can join an IRA.

  • IRA owners may withdraw from their account at any time, although a 10% tax is applied to anyone who withdraws before the age of 59 1/2.

  • Most IRAs offer a wider range of investment choices than employer plans.

Interested in knowing the difference between an IRA and a 403(b) account? Click here.

If you’d like to discuss setting up an IRA, consult one of our financial advisors by clicking the button below:

What is the Difference Between a 403(b) and an IRA Account?

The main difference between an IRA and a 403(b) is the type of account. A 403(b) is set up by the employer while the IRA can be set up by an individual.

Eligibility

Eligibility for a 403(b) depends on the employer. Except for a couple of small restrictions, almost anyone is eligible for an IRA.

Contribution Limits

A 403(b) has a much higher contribution limit than an IRA. In 2021, a 403(b) annual contribution limit is $19,500 while an IRA annual contribution limit is $6,000 (and a $1,000 catch-up limit if you are 50 or older).

Investment Selection

IRAs typically have a much broader selection of potential investments than 403(b)s, which may be limited by the plan.

Fees

Administration fees for 403(b)s are much higher than an IRA.

If you don’t have a 403(b) plan available, fund an IRA. Many small employers, ministries, or faith-based organizations don’t have the money or experience to offer a retirement plan at all, let alone one with either a basic or matching contribution. This means you have to start your own retirement plan.

To learn more about Roth vs Traditional IRAs, Click Here.

7 important steps for better employee retirement plan participation

7 important steps for better employee retirement plan participation

One of the biggest concerns of Plan Sponsors is the fear of low-plan participation.  Imagine spending your money, time, and effort in setting up a new plan for your employees, and they don’t understand or take little interest in the plan. Maybe you’ve already experienced this!

Steps to Begin Educating Your Participants on Their Retirement Plans

How to inform and educate your participants on retirement planning:

Let’s first go over the definition of Inform and educate.

To "inform" means: To provide specific details about a topic in such a manner that it is useful in arriving at a solution to a felt need.

To "educate" means: To teach a participant how to apply financial principles using available information to solve an economic problem or provide insight into an issue of life.

So how do you begin?

Here are some steps you can take to begin helping your participants understand their retirement plans:

  1. Review the details of the retirement plan as outlined in the Summary Plan Description: Who is eligible for what and when.

  2. Help them understand how to access information about their plan.

  3. Help them understand how to enroll, review, and make changes to their account.

  4. Help them understand what investments are available and information about them.

  5. Help them understand the legal limitations of the plan: contribution limitations, minimum contribution amounts, etc.

  6. Show them where to find supporting resources: calculators, definitions, explanations.

  7. Provide an adequate investment vocabulary.

A key issue of life is: Will you have enough resources when the paycheck stops to continue in a lifetime of ministry?

Here are some steps you can take to help your participants financially prepare for their future.

  1. Learn how to construct a reasonable assessment of future cost of living.

  2. Estimate how much income they will be receiving.

  3. Check to make sure they are emotionally prepared.

  4. Become familiar with the basic principles of investing such as:

    1. The impact of compounding

    2. The value of dollar-cost averaging

    3. The impacts of time, rate of return, and invested amount in achieving a desired financial result

    4. The meaning of risk and how to manage it

      1. Investment diversification

      2. Allocation of resources

And finally, it’s important to help your participants develop the skills and abilities to communicate with spouses and children about financial issues in the present and about future realities.


Click here to learn more about the retirement education Envoy provides.

Choosing Between A 403(B) And A 401(K) Retirement Plan

When choosing a retirement plan, it is important to understand the difference between 403(b), 403(b)(7), 403(b)(9), and 401(k) plans.

Assuming that your organization is a 501(c)(3) and is either a church or parachurch organization, you qualify for any of these retirement plans under IRS regulations. So, why chose one over the other?

In its simplest form, the 403(b) is cheaper to establish and administer.
The primary reason is due to the fact that 403(b) plans require less reporting and testing. We have seen that a majority of 401(k) plans are often recommended by advisors not familiar with 403(b) plans and how they can benefit ministry organizations.

A simple way to remember the distinction between these two plans is that 401(k) plans are used exclusively by “for profit” organizations. These organizations fall under ERISA Regulations, which requires that tax-deferred accounts undergo periodic reviews known as discrimination testing. For the 403(b) plan, there is less administrative burden on the organization.

If you are designated as a church by the IRS, always choose the 403(b)(9) plan.

Learn more about Church Retirement Plans.

Opportunity Cost vs. Opportunity Gain

Do you look back in regret at the lost opportunities in your life?

So many live a life of regret. They spend their productive hours ruminating on what could have been, what should have been, what might have been or the failure of what did occur. 

Job reflects on his birth this way (Job 3:5): 

Let the darkness and utter gloom claim that day for its own. Let a black cloud overshadow it, and let the darkness terrify it.

Are you discouraged? Job certainly nailed the emotional component.

We can all identify with emotion. As leaders, we come face to face with discouragement. How often? If leading, then often in some part of each day.

In addition to discouragement, there is simply the issue that “stuff happens.” Plans go awry.  Sometimes it is because of poor planning, sometimes it’s poor execution, and sometimes outside, unexpected realities totally destroy the best of plans. 

Whether it be a personal issue or response to one, or a ministry/business issue or response to one, each and every activity has an outcome. There is a gain or loss, moving forward or backwards, there is a net result of all our plans, actions, and implementation strategies. 

Peter Drucker said: "Yesterday's actions and decisions, no matter how courageous or wise they may have been, inevitably become todays problems, crises and stupidities." 

Now there is a reality we can all identify with!

The opportunity lost I'm discovering is the amount of productive time that "retirees" could provide to ministries.

While many do, most Christian workers, ministry minded leaders, and business oriented Christians, do not even begin to think about ministry in their retirement years until after they retire. Let's examine the reality of lost opportunity and the potential for gain.


The definition of OPPORTUNITY COST IS:

The loss of potential gain from other alternatives when one alternative is chosen. 


We know that each choice has consequences. The idea of Opportunity Cost allows us to measure that cost. 

Conversely, the idea of Opportunity Gain allows us to measure the incremental gain for a decision, choice, and course of action. 

How big is the opportunity for gain in the Kingdom?

Because of our longevity, a tremendous opportunity exists for the Kingdom. When understood and acted upon aggressively, the size of the Gained Opportunity is huge. When not understood, or addressed, the size of the Lost Opportunity is monumental.

 Here it is: 

  • 20% of the population equaling about 50,000,000 will be “elderly” by 2030.

  • If we even take a decade, a 10 year period, and calculate a number equal to “availability” of productive time, the number is more than huge.

Let me try to figure it out.  You can argue with the numbers but you’ll see the point.

  1. 12 hours per week of productive time

  2. 52 weeks in a year = 624 hours

  3. 624 divided by 8 hours per day = 78 days a year

  4. 78 day x 50,000,000 people = 3,900,000,000 days per year

  5. Times 10 years equals 39,000,000,000 day of opportunity lost

  6. That equals over 106,000,000 years.

If your ministry had additional productive input equal to 500 hours a month, how would you manage it and what would be the impact for the Kingdom?  Let's think about this some more and address it in future times together. 

This is just a small example and only takes a 10 year period.


Go to Future Funded Ministry for more information on creating future opportunities for the Kingdom.

Why It's Important to Communicate With Your Retirement Plan Provider

When you offer a retirement plan to your employees, you are taking on fiduciary responsibility.

It is your responsibility to oversee and make decisions about your retirement plan for the benefit of the participants. This is also why it’s a good idea to frequently communicate with your retirement plan provider.

Two ways that you can create an impactful retirement plan are:

  • Actively partnering with your plan provider to protect your plan and increase employee satisfaction.

  • Following the rules that are now in place and knowing what it takes to be in compliance. Being prepared and protected.

Actively partnering with your retirement plan provider means:

  1. Being engaged with the employer support systems available to simplify your work.

  2. Being aware of and directing employees to the participant servicing options.

  3. Staying in constant communication with your plan provider (regarding new hires, census data, changes to the plan, etc).

  4. Being aware of ongoing plan maintenance (reviewing your plan’s terms, reports, etc).

IRS  and the Department of Labor

Now that new regulations are in place, the regulatory entities move to the enforcement stage. Target segments are companies owned by foreign entities, small businesses, and 403(b) non-profit organizations. They have expressed the belief that 77% of these plans are not in compliance.

The result is that we must be prepared for the audit when it comes.

Helpful Retirement Plan Compliance Resources

Helpful Retirement Plan Compliance Resources

Retirement Plan compliance is critical as you're a Christian organization and an example to others. Two governing agencies that oversee retirement plans are the IRS and The Department of Labor. You probably don’t want to become an expert on all of the regulations but you certainly want to arm yourself in case one of them shows up on your doorstep.

12 Things Plan Sponsors Need To Know

12 Things Plan Sponsors Need To Know

Executive Pastors, Business Managers, Board Members, CEO’s, COO’s, and HR Directors associated with Non-Profits are often in the dark when it comes to understanding retirement plans. Often this includes those who are directly responsible for the oversight of their plan or charged with the responsibility of setting up or finding a new vendor.

Unity produces productivity

Team.jpg

Leading and unity inherently include a dynamic tension that is hard to resolve. Leading includes envisioning a future that does not exist. It also includes communicating that vision to a group of people that have not seen, experienced, or acknowledged the potential existence of the vision.

Anything new will be accepted by a few, acknowledged as possible by more, and resisted by most. This reality illustrates why leadership is the purview of the few and the challenge for all. As a friend of mine once opined:

Leading with new ideas is like pushing a wet noodle uphill with your nose.

A bit graphic perhaps but essentially true.

Moving an idea from acceptance to excitement and ultimately onto unity is a tough road. We know that teamwork leads to amazing successes. After winning college or professional sports national championships, the television and radio interviews go something like this:

Question: “How do you account for the tremendous success of the team?”

Answer: “It was amazing how we all came together and accomplished this success!”

What does “came together” mean? Perhaps this coming together is the key ingredient to success. It must be hard to accomplish and very powerful when it happens.

So, does it happen by chance, just luck, or the alignment of the moon and the stars? I don’t think so! It happens when the hearts of men and women change, when personal priority is forfeited, and each individual dedicates themselves to a common goal. They take their identity from outside themselves and commit to something other and greater than themselves. Does that description ring true to you?

I went searching for the basis and example of this phenomenon outside of the world of sports and found that the christian scriptures are a source of the truth. Jesus’ teaching instructs us about life here and life eternal. What does he, and the disciples that he taught, say about this subject?

We can start with Jesus’ own words about unity and success in John 17. As a leader, he certainly challenged the men and women of both his day and current day with a new way of thinking and subsequently a new way of living.

Jesus’ goal expressed here is a powerful one: The world will know that he was sent into the world by God His father. That truth then legitimizes his teachings, life, and the reality of his death and resurrection. Without that knowledge, proof, and acceptance of his claims are hollow and the reality of an afterlife for believers is suspect.

The power and reality of His message is demonstrated by his being united with God and subsequently his followers with him. It is in the unity of voice, message, and action power exists and reality affirmed. It is how we “win” the game and show the world that Jesus is who he said he was and that by following Him we, including our family and friends, can be changed. And that an eternity with him is real on the condition of accepting the truth about ourselves and His role in our redemption.

Not an easy task and we need leadership to accomplish it. Interestingly, the Apostle Paul expands on this theme numerous times, as does Peter. Understanding the theme is important is all aspects of ministry where it takes a team to accomplish a goal…..and that is everywhere and in almost every situation. I say “almost” as a hedge against the exception however, I can’t think of one.

It takes a team to be productive, to achieve a goal, and to change lives.

Here are three of the key ingredients to finding unity and producing God inspired results. Without that God inspiration, we can only strive for the “man inspired” results. And these results are more limited and often lead to unintended and painful consequences.

1.      Love: if you start with a clear vision and unroll it starting with love, the results will always be better. The underlying principal is that concern for the other person, above yourself, will open you and them to more possibilities impacting success. In growing God’s Kingdom here on earth, “They will know we are Christians by our love” for each other and the constant demonstration of that love is convincing and inviting evidence of our faith and the reality of Jesus in our lives.

2.      Listen: You only learn by listening - rarely by talking. Some of us gain insight and clarity through verbal exchange, even within ourselves. It is the listening to others or even hearing ourselves speak that learning, clarity, and new understandings occur. I’m wearing a wristband distributed in our church last week that reads: “I am second." Inherent in that commitment is the priority, importance, and learned skill of listening. Listening for the “still small voice” for guidance and the insights, issues, and concerns of those we are leading.

3.      Like Minded: Until we are like-minded and pulling in the same direction, we are a house, team, or society pulling against itself. Certainly, there is value in discourse but progress comes when unity and like mindedness is achieved. When we all come together to accomplish a common goal

It takes patience, encouragement, perseverance and steadfastness to move from like-mindedness to success. The Apostle Paul knew this when he wrote in Romans 15:5-6:

May the God who gives endurance and encouragement give you the same attitude of mind toward each other that Christ Jesus had, so that with one mind and one voice you may glorify the God and Father of our Lord Jesus Christ.

God’s principles of success play out across the spectrum of our lives. Those of us with leadership responsibility are wise to acknowledge and practice those principles in all we do. Loving, listening, and coming to a like-mindedness are elements leading to both unity and productivity success.

Stay with us as we journey through the hills and valleys of life with Trusted Advice along The Way.

Bruce

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