403(b)(7) Plans for Ministry Organizations and Institutions

A 403(b)(7) plan is a tax-deferred retirement plan available to employees of nonprofit organizations who are not able to sponsor a church plan. This plan is similar to a 403(b)(9) plan in that it's an easy way to save for retirement and to benefit from pre-tax retirement savings. A 403(b)(7) plan may be subject to ERISA requirements, such as annual 5500 reporting and nondiscrimination testing.

Who can participate?

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

Types of plan contributions

• Based on specific plan provisions, participants can elect to have their employer withhold money from their paycheck that can be contributed as a tax-sheltered, after-tax or Roth elective deferral contribution.
• Based on specific plan provisions, employers can make matching, non-matching  or discetionary contributions.

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

• Employer contributions are not subject to Social Security tax or income tax at the time of contribution.
• Tax-sheltered participant contributions are not subject to income tax until distributed.
• Rollovers from other eligible retirement plans or Traditional IRAs are possible without tax consequence.
• Earnings on all contributions and rollovers are tax-deferred.
• Earnings on Roth elective deferral contributions can be withdrawn tax-free if certain conditions are met.

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).