FAQ's
1.) Are records held by the Benefits Board considered confidential?
2.) Is my retirement account at the Benefits Board covered under FDIC insurance? In other words, how secure is my retirement?
3.) As a new minister, I understand that I can opt out of the Social Security system. Should I do so?
4.) Why am I being asked to update my beneficiaries?
5.) Does the Benefits Board have any responsibility or duty in regards to the Aged Ministers' Fund of the Church of God?
6.) Will I ever be allowed to move my pre-July 2000 contributions into one or more of the stock accounts?
7.) Has the constitutionality of the ministers' "housing allowance" provision ever been questioned?
8.) Will IRA contributions, once they are rolled into the Ministers’ Retirement Plan (something that is allowable as of January 1, 2002), be treated like MRP contributions and therefore subject to be distributed in retirement as housing allowance?
9.) How do I know how much I have contributed towards the church plan catch-up provision allowed by the IRS?
10.) What would happen to my retirement account if a beneficiary designation form is not on file?
11.) How can I best keep up to date on matters affecting the market, and thus my retirement account, and have constant information about my personal retirement account at the Benefits Board?
12.) How are the current market conditions, in light of the recent terrorist attacks and war efforts, affecting my retirement account if I am only in the Trustees' Fund?
13.) It is my understanding that when I start drawing from my account at the Benefits Board that my distributions are designated as housing allowance since I am a minister of the gospel. Does that designation of housing allowance continue if I die and my wife is left as the beneficiary?
14.) How can I be assured that I am maximizing the tax benefits of being a minister?
15.) May I list my child as the primary beneficiary of my Ministers' Retirement Plan account?
16.) If I start drawing from my account at the Benefits Board on a regularly scheduled distribution of, say, 15 years, can I later change my mind to make the pay out either longer or over a shorter period of time?
17.) I would like to know the maximum amount that I can put in the retirement plan?
18.) May a participant in the Ministers' Retirement Plan begin drawing out of his retirement account even though he has not reached "retirement age" according to Social Security?
Are records held by the Benefits Board considered confidential?
Answer
The Benefits Board is very cognizant about the confidentiality of the records that we maintain for our participants. While a participant is fully entitled to information on his or her account, no one else should have access to that information. Our internal policies and procedures are set-up to protect the confidentiality of your account.
Therefore, if you contact the Board about your retirement account, please do not be offended when we ask you to provide some type of identifying information. We may request that you provide a Social Security number, your birth date, or the name of your primary or secondary beneficiaries to assure that we are disclosing information only to the named participant.
No one else has the right to obtain information on your account. The only exception is your spouse, and then only if your spouse is listed as your primary beneficiary. Your spouse will also be asked to provide identifying information before your account is discussed.
Unless a specific release is provided, the staff at the Benefits Board will not discuss your account with church officials, bankers, investment advisors, or lawyers. Even the existence of an account with the Benefits Board will not be confirmed without a release.
Further, while the Board is not required to provide information on specific investments beyond what we post on our web site and what is included in our publications, we have maintained an “open door” policy on discussing investments with participants beyond what is legally required. While information on specific investments will not be provided over the telephone, by electronic means, or by mail, the staff of the Board will be glad to set up an appointment for any participant to come into the office and be fully briefed on any investment (stock funds, bond funds, church loans, etc.) that the Board has an interest in.
It is our hope that you will understand the confidentiality policy under which we operate. Should you have any questions, the staff will be glad to provide clarification.
Is my retirement account at the Benefits Board covered under FDIC insurance? In other words, how secure is my retirement?
Answer
Your retirement account does not carry FDIC “insurance.” No financial institution can offer FDIC insurance upon any account other than “demand” accounts, such as checking and savings accounts. By demand account, it means that you can demand that the financial institution return all your funds at any time without government regulations or intervention. However, your retirement account is not subject to such demand. To receive the tax benefits that come with retirement investing, you can not access your funds, except in limited situations, until you reach 59½ years of age.
Therefore, your protection in the Ministers’ Retirement Account, or any other 403(b) or 401(k) retirement plan, is your choice of institution selected to manage your long-term retirement account. Specifically to the Trustees' Fund, the account is primarily invested in two major asset classes - (1) church mortgages and (2) government, agency, and corporate bonds. Let me address each briefly.
The church mortgage portfolio is made up of more than $60 million worth of loans to churches within our denomination. Those loans are secured by a first mortgage on the property. In addition, state council underwriting is required in all situations - and International office underwriting is required if the loan is over $1 million, in a mission state or borderline state, is to a state office, or falls under other criteria set out by the Board. By General Assembly guidelines and the by-laws of the Benefits Board, we can not loan more than 60% of the appraised value (i.e. if the property appraises at $1 million, we can only loan up to $600,000). Further, the local church can not be spending more than 25% (and in some cases less) of their monthly income on the proposed mortgage payment. Therefore, our loan criterion is much more stringent than most financial institutions. In the 20-year history of our loan program, we have never suffered a loss on a loan.
In the bond portfolio (currently more than $100 million), the majority of the bonds are government or agency bonds - meaning they are backed by the full faith and credit of the U.S. government. While those bonds could technically default, it would mean that the entire government had defaulted - which is highly unlikely. We do have some exposure to corporate bonds but they must be investment grade or higher to remain in our portfolio. With our outside bond managers, our consultants, our external auditors, our outside legal counsel, and our internal controls, we feel confident that we have safeguards in place to assure that our investments are safe.
The Trustees' Fund and the entire operation of the Benefits Board is monitored and under the continuous jurisdiction of the IRS. Our 403(b) plan status places us completely under their purview.
As a new minister, I understand that I can opt out of the Social Security system. Should I do so?
Answer
Absolutely not!! The Benefits Board recommends that all ministers participate in Social Security.
Since 1968, ministers have automatically been covered under the Social Security system unless they pro-actively chose to opt-out of coverage. Ministers are the only group allowed to opt out of the Social Security system – but they can only do so if they meet certain criteria set out by the IRS, i.e. opting-out has to be done before the second year of ministry, etc. To opt out, ministers are required to file a Form 4361 with the IRS. To truthfully file a Form 4361, the minister must “certify” that because of religious principles he is “conscientiously opposed to … the acceptance … of any public insurance (i.e. Social Security and Medicare) that makes payments in the event of death, disability, old age, or retirement.”
It is important to notice that the certification is because of the opposition to the acceptance of benefits, not to the payment of the taxes. Most people, including ministers, would say that they are opposed to the payment of the taxes. However, it is conceivable that Form 4361 could be interpreted to provide that your conscientious objection must be such that even if you were required by law to pay the taxes that you would not accept the benefits once you were eligible to receive them.
In a review of the legislative history of this provision, it seems clear that Congress only intended for those of the Amish faith to use this “opt-out” provision. However, ministers of all faiths have, I believe, wrongfully used this provision. Further, while most ministers who file a Form 4361 are doing so for economic reason – simply because they do not want to pay the Social Security taxes, they are in fact placing their family’s future in harms way. By filing the “opt-out” application, ministers are not only opting out of Social Security, they are also opting out of the Medicare system. Most young ministers do not realize the impact of their decision, especially in regards to not having Medicare available upon retirement or Social Security disability available prior to retirement in the event of a debilitating event.
The acceptance by the IRS of a completed Form 4361 supposedly irrevocably removes the minister from the Social Security system for ministerial income purposes. However, during the past 24 years, Congress has allowed three different “windows of opportunity” for ministers to change their mind concerning their “irrevocable” decision to get out of the Social Security system. The last “window” closed, for all practical purposes, on April 15, 2002. If a minister has an “opt-out” form on file with the IRS, he can still gain Social Security “credits” by working at a secular job. The “opt-out” provision only applies to ministerial employment. Although the rules are more complicated than we can go into here, simply put, a person can qualify for Social Security benefits upon retirement, including Medicare, after they have worked for 40 quarters, which equals 10 years. To earn one credit, you must make at least $920 during the quarter in 2005 – and that number increases each year based upon inflation.
To qualify for Social Security Disability, the rules are even more complicated. However, generally you will need to have earned at least 20 credits in the last 10 years ending with the year you become disabled.
A simple example may be helpful. Let’s assume that a man enters the ministry at age 30. He has had secular employment since age 18 and has earned more than 40 credits towards Social Security. Within his first year of ministry, he decides (upon bad advice) to opt-out of Social Security for ministerial income purposes by filing a Form 4361. Upon retirement, the minister would be eligible to draw a small monthly Social Security retirement check – and he would be eligible for Medicare. However, if at 36, 45, 54, etc. he became disabled, he would have no Social Security disability or Medicare. He would have to survive until he reached 65 years of age to qualify for Medicare. Had he not contributed enough quarters from his earlier secular employment, he would not have Social Security, Medicare, or Disability available to him at all. Even if he had invested the money that he would have normally paid into Social Security, his return on such would have to be sufficient to cover not only his anticipated Social Security payments – but also medical insurance for someone who does not have Medicare coverage upon retirement. One of the largest medical insurance companies in the country has estimated that a single policy for a person over 65 without Medicare would cost upwards of $1700 per month.
The simple retirement model the Benefits Board uses is a three-legged stool. The three legs are made up of a strong retirement plan, personal savings, and Social Security. If any of those “legs” are missing or incomplete, the stool is going to fall. Therefore, the Benefits Board strongly encourages all ministers to fully participate in the Social Security system.
Why am I being asked to update my beneficiaries?
Answer
Every so often each participant in the Ministers’ Retirement Plan will receive a memo from this office concerning their beneficiary designations. Enclosed with the memo will be your most recent beneficiary designation on file with the Benefits Board, as well as a new form to make changes or update your beneficiaries. It is extremely important that you respond to this office concerning your beneficiaries, either by verifying that the designation form we have on file is up-to-date or by completing a new form. If the form we have on file is accurate but does not have updated address information or Social Security numbers, then it will be necessary to complete a new beneficiary designation form with the corrected information.
A few minutes taken by you now to complete the form will save your heirs countless problems in the event of your untimely death. While we have been encouraging everyone to update their beneficiary designations, we have found that many do not think that this is necessary. However, at their death, it has been discovered that children born after a participant joined the plan were not listed as beneficiaries, a new spouse was not considered in the designation, beneficiaries are now deceased, just to name a few of the problems. Therefore, every participant at some point may be asked to complete a new beneficiary designation form or verify that the current form is accurate with all information complete. Your assistance in this large project will be greatly appreciated.
Does the Benefits Board have any responsibility or duty in regards to the Aged Ministers' Fund of the Church of God?
Answer
The Benefits Board receives calls almost on a daily basis concerning the Aged Ministers’ Fund. The Aged Ministers’ Fund is administered by the Church of God International Office and not by the Benefits Board. Questions concerning the administration of the Aged Ministers’ Fund should be addressed to the Business and Records division of the Church of God International Office. That office may be reached by phone at (423) 478-7780. If you are seeking information concerning an annuity that was bought with funds from the Aged Ministers’ Fund with Lincoln National Life Insurance Company, you may call Lincoln National directly at (800) 348-4608.
Will I ever be allowed to move my pre-July 2000 contributions into one or more of the stock accounts?
Answer
All funds in a participant’s Ministers’ Retirement Plan account are completely allocable by the participant as of January 1, 2007.
When the Board began the process of allowing for self-direction of investment options within the Ministers’ Retirement Plan, the decision was made to allow for complete self-direction of all contributions made on or after July 1, 2000. All contributions made before that date were temporarily “locked” in the Trustees’ Fund. The Board of Trustees later determined that 2.5% per quarter (10% per year) of the pre-July 2000 contributions would be available for self-direction (or allocable) beginning the third quarter of 2002 (July 2002). Therefore, allocable accumulations included all contributions made since July 1, 2000 plus the additional 2.5% per quarter of accumulations as of July 1, 2000 as they become allocable, beginning after July 1, 2002.
The Board’s ultimate purpose was to make all contributions available to the participant to allocate as he or she so desired. However, the decision was made to use the gradual process as explained above to prevent a massive movement of funds out of the Trustees’ Fund that could have possibly jeopardized the Board’s church mortgage portfolio.
With the Board’s action in November 2006, all accumulations in the Ministers’ Retirement Plan are now allocable and the confusing “allocable accumulations” process was eliminated effective January 1, 2007, thereby making all contributions made before and after July 1, 2000 100% allocable by the participant.
Of course, without specific action on the participant’s part, all accumulations will stay right where they are currently allocated. Simply put, unless the participant takes action to reallocate existing accumulations that have been in the Trustees’ Fund, those funds will stay in the Trustees’ Fund.
Has the constitutionality of the ministers' "housing allowance" provision ever been questioned?
Answer
For information on this controversial topic, please review the section of the Board’s web site that deals with the constitutional challenges to the ministerial housing allowance over the past few years. That information can be found at the following link: http://www.benefitsboard.com/Warren%20-%20Web%20Articles.htm
Will IRA contributions, once they are rolled into the Ministers’ Retirement Plan (something that is allowable as of January 1, 2002), be treated like MRP contributions and therefore subject to be distributed in retirement as housing allowance?
Answer
Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the Plan can accept roll-ins from other retirement accounts. All roll-ins from non-403(b) accounts are placed into separate sub-accounts for record-keeping purposes. The IRS does not currently allow the Board to designate distributions from “rolled in” accounts as ministerial housing allowance.
How do I know how much I have contributed towards the church plan catch-up provision allowed by the IRS?
Answer
This question involves the $15,000 catch-up (but no more than $3,000 per year) that is available to ministers and church-related employees who have been credentialed or employed by the church for at least 15 years. The tax code in times past placed this burden on the participant – and therefore, the Benefits Board never separately accounted for the ministerial catch-up provision until 2002. All catch-up contributions since that time are accounted for in the Benefits Board’s records.
What would happen to my retirement account if a beneficiary designation form is not on file?
Answer
If there is no beneficiary form on file, the plan document for the Ministers’ Retirement Plan provides for distribution based upon the following order of priority: first, to the Member’s surviving spouse, if any; second, to the Member’s surviving children, if any, in equal shares; and third and finally, to the Member’s estate. This process would be implemented if there were no named beneficiaries or if no named beneficiary survived the Member. However, we do suggest that you name your beneficiaries and that you update your designation at least every three years.
How can I best keep up to date on matters affecting the market, and thus my retirement account, and have constant information about my personal retirement account at the Benefits Board?
Answer
Each week the Benefits Board sends out an e-mail update to those that have requested such. "In the Know" is a way to keep up with the market and how such is affecting the performance of your accounts at the Benefits Board. To get "In the Know," please e-mail us at info@benefitsboard.com to be added to the distribution list.
In addition, you can now access your account through the internet. From our home page, you may request a password that allows you to access your personal account and receive up-to-date performance numbers, as well as information about your deposits.
How are the current market conditions, in light of the recent terrorist attacks and war efforts, affecting my retirement account if I am only in the Trustees' Fund?
Answer
Over the last few years, we have gotten many inquiries about the impact of the terrorist attacks and the ongoing war, and subsequent drops in the financial markets, on the retirement accounts offered by the Benefits Board to Church of God ministers and church-related employees. The three stock funds offered by the Board are strictly market-driven. Therefore, when the market drops, those accounts lose value.
On the other hand, the Trustees’ Fund, while not market-driven, is extremely interest sensitive. The Trustees’ Fund is primarily invested in long-term church mortgages and government/agency/corporate bonds. When interest rates drop, many churches are able to find mortgages at a rate better than we can offer them through the Benefits Board. Therefore, we have a rash of re-financing. In addition, interest rate reductions affect what interest is paid on bonds. Both these factors have an impact on the Trustees’ Fund and the amount of interest we are able to pay participants.
The Board of Trustees of the Benefits Board meets regularly to decide what action, if any, should be taken concerning the interest rate paid participants in the Trustees’ Fund.
It is my understanding that when I start drawing from my account at the Benefits Board that my distributions are designated as housing allowance since I am a minister of the gospel. Does that designation of housing allowance continue if I die and my wife is left as the beneficiary?
Answer
Section 107 of the Internal Revenue Code has been interpreted by several revenue rulings (particularly Revenue Ruling 75-22) to allow a minister of the gospel to claim distributions from a church-sponsored retirement plan as housing allowance, subject to those funds being actually used for housing. It should be noted that a housing allowance can not be claimed for distributions from an IRA or other types of retirement plan - only a church sponsored plan, such as the Ministers' Retirement Plan administered by the Benefits Board.
However, once the minister is deceased, the housing allowance can no longer be claimed - unless the spouse also has ministerial credentials. Although we recognize that the spouse is a vital part of the ministry team, the IRS does not extend the housing allowance privilege to anyone other than the minister. While we do not normally suggest that someone should obtain ministerial credentials, it may be in the best interest of the spouse to consider getting credentials if they have an active ministry.
How can I be assured that I am maximizing the tax benefits of being a minister?
Answer
Most importantly, if you do not have the book entitled "Church and Clergy Tax Guide" by Richard Hammar, you should get a copy today. The book, a 700-page guidebook, is available from the Benefits Board at cost. The "Church and Clergy Tax Guide" is updated each year and you should make sure that you have the latest copy.
The tax guide book gives you detailed information on how to establish a housing allowance, set up an accountable expense plan, and provide for retirement, just to name a few of the tax saving options for ministers discussed in the book. In addition, I would refer you to the Treasurers’ Manual and the Ministers’ Compensation Manual, available on this web site. Basic information is provided there for the minister and the church treasurer in a simple to read format at no cost.
A minister is provided special rules under the Internal Revenue Code that allow him to legally avoid the paying of taxes on certain portions of his compensation. You should utilize these rules to the fullest extent possible to reduce your tax liability.
May I list my child as the primary beneficiary of my Ministers' Retirement Plan account?
Answer
If you have a spouse, your spouse must always be listed as your primary beneficiary unless he/she signs a waiver under oath that he/she is voluntarily relinquishing their rights to your account. For estate planning purposes or for other personal reasons, you may desire such a bequest. To legally accomplish such, the waiver has to be on file with the Benefits Board. Forms are provided for this purpose.
Spouses from a second or subsequent marriage assume the position of the primary beneficiary unless a voluntary waiver is filed with the Benefits Board.
If I start drawing from my account at the Benefits Board on a regularly scheduled distribution of, say, 15 years, can I later change my mind to make the pay out either longer or over a shorter period of time?
Answer
Generally, the IRS regulations prohibit us from allowing you to change your irrevocable selection. Therefore, it is critical that you consider all your options before setting up a distribution schedule. Things such as housing costs, medical expenses, and other unforeseen expenses should be calculated in to your decision. However, in cases of severe hardship, the IRS has established a procedure in which a possible change could be made to your distribution schedule.
I would like to know the maximum amount that I can put in the retirement plan?
Answer
The contribution limits for retirement plans, like the Ministers’ Retirement Plan, change each year either by legislation or regulations. A worksheet detailing the new annual contribution limits is available on the Board’s web site - www.benefitsboard.com.
May a participant in the Ministers' Retirement Plan begin drawing out of his retirement account even though he has not reached "retirement age" according to Social Security?
Answer
After a participant has reached the age of 59 1/2, he may begin withdrawals (without penalty) out of his Ministers' Retirement Plan account. However, distributions from the account can not exceed 30 years under current law. The greater issue that a participant in this situation must face is health care. Until he reaches 65 years of age, the participant will not be eligible for Medicare. Therefore, even though the person may begin drawing reduced benefits from Social Security at 62 years of age, his Medicare will not become effective until he reaches 65 years of age.