How do you establish a 403-b?

For a pastor, why is a 403-b pension plan better than an IRA?

There are three main reasons for using a 403-b pension plan instead of an IRA:

1) The church makes the deposit which can be from salary or in addition to salary and the amount deposited is exempt from the self-employment tax,

2) the contribution limits are much higher than the contribution limits of an IRA and there is a catch-up provision for pastors who have been in the ministry for 15 years, and

3) when you retire the distributions you receive from your 403-b can be designated as housing allowance. The 403-b can be invested into the same vehicles as any pension plan (i.e. stocks, bonds, etc).

How do you establish a 403-b pension plan?

Simply contact any reputable investment agency such as Merrill Lynch, Dean Witter, etc.  Find an investment counselor that you want to work with and tell him you want to set up a 403-b pension plan.  Your investment counselor will give you the name and address where the church should direct the contributions.  Beginning January 1, 2009, churches are required to have a “plan document” for your 403-b plan.  The “plan document” is a lengthy and detailed document.  Because of the many details that need to be included, the document will need to be mostly written by your investment agency.  This requirement is making it difficult for some pastors to find an investment agency willing to set up their 403-b.  You should find an investment agency to set up a 403-b for you without requiring you to hire a TPA (third party administrator).  We recommend two investment agencies.  Either one of these will be able to get your plan document up and running.  These two agencies are also able to designate your housing allowance for you once you begin to receive distributions from the 403-b.

GuideStone Financial Services
2401 Cedar Springs Road
Dallas, Texas 75201-1498
Dixie Beard, CRPC®
Director – Business Development
Retirement Institutional Investment New Business
Registered Representative
214-720-4661 Office
1-866-692-6327 Fax

Envoy Financial can set up a 403-b for you.  Their set up fees are approximately $600.

Envoy Financial
4194 Royal Pine Drive
Colorado Springs, CO 80920-1556
Timothy A. Struck, CRPS
Director of Retirement Plan Consulting
888.879.1376 ext. 217

Attention: Tax Law is subject to interpretation. Please be advised that the material contained on this Web site is for information only and is not intended to be a substitute for professional legal advice. The Stewardship Services Foundation endeavors to update the information on this site on a regular basis, but cannot guarantee its accuracy at all times.