As part of an overall compensation package, retirement plans can help pastors and church employees save for the future while recruiting new staff. But choosing which plan to offer and how much to contribute may be challenging; especially with regard to 403(b)(9) plans specifically created for churches and 501(c)(3) organizations.
There are so many providers and plan options out there with different pricing structures that it’s often hard to ascertain their true costs – this confusion often trickles down to employees, who may not understand what they are paying for or may put their retirement savings at risk unknowingly.
Beginning by reviewing your church’s current plans, review of fees charged and investment options offered is key to improving them. Keep in mind that some fees aren’t directly incurred by the church itself but instead embedded into investments which is great as costs can be spread among investors more evenly; but ensure employees understand exactly what their hard-earned dollars are being invested into.
Consider offering matching employee contributions made by your church as another option to encourage participation and increase average contribution rates. You could provide this match on either a dollar-by-dollar or percentage salary basis, depending on your church budget.
Consideration should also be given to Roth elective deferral options within a 403(b)(9) plan, which allow ministers who are ordained, licensed, or commissioned to contribute on a pre-tax basis and grow tax deferred investments until distributions in retirement take place tax free – an invaluable benefit only available through tax-exempt 403(b)(9) plans; such plans cannot provide this feature, which aren’t available via other ERISA covered plans such as 401(k).
As you consider all the various options available to your church, keep this in mind: A properly structured 403(b)(9) plan can be implemented without incurring additional expenses for your congregation. It provides a cost-effective and straightforward means of offering valuable benefits for pastors and church staff alike. We would be more than happy to help explore this option for your specific situation – simply reach out and we can arrange a time when we can talk through your options together; additionally we can assist with adopting or revising existing policies if required – thank you for reading!