Money Purchase Pension Plans for Ministry Organizations and Institutions

A Money Purchase Pension Plan is a defined contribution plan in which the amount of contributions each employee receives from the employer is in proportion to the employee’s wages. These plans can either be subject to ERISA requirements or they can be a church plan. If the employer is eligible to sponsor a church plan, the plan is not subject to certain ERISA requirements, such as annual 5500 reporting. However, both ERISA and church plans will be subject to nondiscrimination testing.

Both for-profit and many types of tax-exempt organizations can establish these plans for their employees. For a for-profit employer, a significant tax advantage of this plan is the employer's ability to deduct up to 25% of the aggregate compensation of plan participants. Unlike profit sharing plans, contributions are mandatory every year, regardless of profits or revenue.

Who can participate?

All employees are eligible to participate unless the plan specifically excludes them.

Types of plan contributions

Employer contributions are required.

Eligibility

The employer has flexibility in determining which employees are eligible. As an example, an employer may impose age and/or service requirements before an employee can participate in the plan.

Potential Tax advantages

Benefits are generally not taxable until distributed. Retirees who are ministers may have retirement benefits designated as a tax-free housing allowance within legal limits.

To learn more about the retirement plans available to your specific organization, email us or call us at 1-888-98-GUIDE (1-888-984-8433).