Church employees such as secretaries, organists, education directors, custodians and office managers serve their congregation without retirement plans being provided to them. Giving these key employees access to such plans would show both fairness and appreciation.
Churches and other 501(c)(3) organizations can make nontaxable contributions to retirement accounts through Section 403(b) of the Internal Revenue Code, with these investments growing tax free before being distributed tax-free when employees retire – making this plan an excellent option for churches.
However, the type of retirement account used can have an enormous effect on how much is available upon retirement. Unfortunately, too often the wrong type is selected due to either ignorance of its benefits or simply taking what’s offered by their recordkeeper or financial firm when setting up their 401(k).
Selecting the ideal retirement plan is vital to pastors’ long-term financial security and that of their family. A secure financial situation in retirement leads to less stress and greater effectiveness both for themselves and for their congregations.
Church boards should consider offering retirement plans as part of their pastors’ compensation packages, as well as be mindful of any tax implications of any plan they create for him/her, making sure not to assume anything about taxable status of certain types of payments made during retirement plans they establish for pastors.
Some church boards may be concerned with the expense of offering retirement plans to all staff, rather than just pastor. One way to reduce these costs is to offer it as a percentage match of salary; this encourages everyone involved with saving for their retirement funds and will help build them faster.
An alternative strategy is for the church to contribute a set dollar amount towards each full-time paid employee’s retirement account, providing an effective incentive for saving. This solution works especially well in smaller churches with limited finances while encouraging employees to save.
Resolution A138 and its associated Canons established the Clergy Pension Fund (CPF). This defined benefit pension plan is funded through assessments paid by members of the church as payroll deductions. CPF offers monthly retirement benefits that last throughout life as well as an account balance to use when drawing benefits in retirement. Furthermore, eligible retired clergy can avail themselves of CPF’s Life Insurance Plan benefit.
Church employees should also consider enrolling in The United Methodist Church’s Clergy Retirement Security Program (CRSP), which is a 403(b) savings plan specifically for bishops and full-time Episcopal clergy as well as church staff. Under this plan, participants may receive matching contributions from their church as well as plan sponsor contributions from participants themselves.