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Profit Sharing/401(k) Church Retirement Plans

A Profit Sharing/401(k) church retirement plan is a defined contribution plan specifically designed for the unique needs of churches or church organizations. While similar to other Profit Sharing/401(k) plans, a church plan is not subject to certain ERISA requirements, such as annual 5500 reporting. In addition, a Profit Sharing/401(k) church retirement plan offers retired ministers the ability to have retirement distributions designated as housing allowance.

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 to 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 discretionary 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

  • Retirees who are ministers may have retirement benefits designated as a tax-free housing allowance within legal limits.
  • Employer contributions are not subject to Social Security tax or income tax at the time of the contribution.
  • Tax-sheltered participant contributions are not subject to income tax until distributed.
  • Tax-sheltered participant contributions by ministers are not subject to Social Security tax.
  • Rollovers from other eligible retirement plans or Traditional IRAs are possible without tax consequence.
  • Earnings on all contributions and rollovers are tax-deferred.
  • Contributions and earnings on Roth elective deferral contributions, if permitted in the plan, can be withdrawn tax-free if certain conditions are met.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).