Question & Answer

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General

Are records held by the Benefits Board considered confidential?

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?

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?

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?

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?

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?

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?

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: Warren Articles

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?

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?

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?

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?

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?

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?

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?

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?

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?

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?

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?

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.

Traditional 403(b)

Who is eligible to participate in the Ministers’ Retirement Plan?

All ministers, as well as other employees who receive compensation from local churches, Church of God state/regional and international offices, Publishing House, colleges and daycare centers are eligible to participate, as long as they are U. S. citizens. 

When is my money available to me from the Ministers' Retirement Plan?

Funds are available when a member attains age 59½. Limited circumstances may allow for earlier withdrawals.

Are my pension benefits taxable?

For retired credentialed ministers, pension benefits from the traditional, before-tax accounts are generally not taxable – distributions are designated as retirement housing expense. (See IRS Publication 517 for more details.) For non-ministers, distributions are taxable when received by the member.

What about a member who may become disabled before reaching retirement age?

When a member is declared totally and permanently disabled, the member accumulations may be available for distribution to the member if he so chooses. 

In case of death, what happens to a member’s account?

If distributions have begun and the member dies before his entire account has been distributed, the remaining portion of his account will be distributed to the spouse, at least as rapidly as under the method of distribution as it was to the member. If there is not a surviving spouse, the member account will be paid to the designated beneficiary (ies) or to the member’s estate. 

May I make a contribution in the year that I file my tax return to reduce my taxes for a previous year?

No, all contributions must be received by the Benefits Board no later than December 31 of each calendar year or the last business day of the year as set by the Benefits Board.

Is there a provision for “rollovers” from other 403(b) plans?

Yes, a “rollover” from another 403(b) plan can be accepted for deposit to a member’s account subject to the approval of the Benefits Board.

May I transfer IRA pension monies or other retirement account funds to my traditional, before-tax account in the Ministers' Retirement Plan?

Yes, as long as the money is from “before-tax” contributions. Please contact the Benefits Board to obtain the proper forms to allow for such a “rollover” of funds.

Is the Ministers' Retirement Plan an IRA?

No, the Ministers' Retirement Plan is a 403(b) retirement income account for eligible employees of qualified employers, which includes 501(c)(3) tax-exempt organizations, in our case the Church of God (Cleveland, TN).

Does my spouse have to be my primary beneficiary?

Yes, your spouse is required to be your primary beneficiary unless he signs a spousal waiver or a Qualified Domestic Relations Order is in place. Other persons may be named as secondary beneficiaries.

Is there a maximum amount that I can contribute yearly?

With some stipulations, a participant in the Ministers’ Retirement Plan can contribute up to 100% of his/her compensation or $55,000 per year (2018), whichever is less. A worksheet is available from the Board to calculate contribution limits. Members with 15 or more years of service may qualify for additional “catch-up” contributions, as well as those who are over 50 years of age.

How can I contribute more than what my employer/church contributes for me?

You must complete a Salary Reduction Agreement (SRA) Form with your employer for any contribution deducted from your salary. (If the employer/church pays your total contribution, no SRA is necessary.) The Benefits Board will provide you with forms and further information if you wish to increase your contribution. 

Are there surrender charges and an IRS penalty if a member makes an early withdrawal of funds prior to age 59½?

Yes, there is a surrender charge for early withdrawals prior to age 59½. There is also a special 10% tax penalty imposed by the IRS, plus the appropriate income tax is applicable. 

If a member contributes through the Salary Reduction Agreement method and moves to another pastorate, department, etc., what is the proper procedure?

A new Salary Reduction Agreement Form must be completed with the clerk/treasurer of the new congregation or employer. This agreement is to be retained by the local church, department, agency, etc.

If a minister's credentials are revoked or if a minister leaves the Church of God, what happens to the member accumulations?

The minister’s account can be maintained for retirement or to to allow him to have his credentials reinstated. However, no contributions can be made unless the participant has ministerial or church-related income.

If an employee (non-minister) leaves the employment of the church, agency, etc. prior to retirement, are they required to withdraw all their contributions?

No. If the participant’s account balance is in excess of $1,000, she may maintain her account at the Benefits Board. Smaller accounts will either be rolled over to an account of her choice or cashed out. However, to make contributions to the account, the participant must be employed by a church or church-related entity. 

Where are the retirement funds invested?

The retirement funds in the Trustees’ Fund are invested in fixed income type investments, including government and corporate bonds, real estate investment trusts, first mortgage loans to Church of God congregation, and other fixed income investments. The equity (stock) funds are invested as directed by the participant.

Is my retirement account guaranteed by any agency of the federal government?

No, the Ministers’ Retirement Plan is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. In addition, the Ministers’ Retirement Plan is a church plan and it is exempt from the Employee Retirement Income Security Act (“ERISA”).

Is this program available to evangelists and chaplains?

Yes, evangelists and chaplains may participate under special rules allowing them to write personal checks for their retirement accounts. Please contact the Benefits Board for further information.

Is it necessary to enroll in the MRP before sending contributions?

Yes, a member must enroll and receive a certificate of membership BEFORE making contributions.

What kinds of distribution options are available at retirement?

Currently there are five distribution options. (See list here)

Roth 403(b)

What is a designated Roth 403(b) contribution?

A designated Roth 403(b) contribution is a type of elective deferral that employees can make to their 403(b) retirement plan.

 

With a designated Roth 403(b) contribution, the employee irrevocably designates the deferral as an after-tax contribution that the employer must deposit into a designated Roth 403(b) account. The employer includes the amount of the designated Roth 403(b) contribution in the employee’s gross income at the time the employee would have otherwise received the amount in cash if the employee had not made the election. It is subject to all applicable wage-withholding requirements. 

Can I make both pre-tax elective and designated Roth 403(b) contributions in the same year?

Yes, you can contribute to both your designated Roth 403(b) account and to your traditional, pre-tax 403(b) account in the same year in any proportion you choose as long as the contributions are within the maximum contribution limits. 

Is there a limit on how much I may contribute to my designated Roth 403(b) account?

Yes, the combined amount contributed to all designated Roth 403(b) accounts and traditional, pre-tax accounts in any one year for any individual is limited (under IRC Section 402(g)). The limit is $18,500 in 2018, plus an additional $6,000 in catch-up contributions in 2018 if you are age 50 or older at the end of the year. The contribution limits are subject to change annually.

Can I make age-50 catch-up contributions as a designated Roth 403(b) contribution to my designated Roth account??

Yes, provided you are age 50 or older by the end of the year and the plan permits these contributions. 

Can I contribute the maximum, including catch-up contributions, to both a designated Roth 403(b) account and a Roth IRA in the same year?

Yes. if you are age 50 or older, you can make a contribution of up to $24,500 to your Roth 403(b) plan ($18,500 regular and $6,000 catch-up contributions) and $6,500 to a Roth IRA ($5,500 regular and $1,000 catch-up IRA contributions) for a total of $31,000 for 2018. Please remember that income limits may limit your Roth IRA contributions but do not limit your designated Roth 403(b) contributions.

Do the same income restrictions that apply to Roth IRAs apply to designated Roth 403(b) contributions?

No, there are no limits on your income in determining if you can make designated Roth 403(b) contributions. Of course, you have to have salary from which to make any 403(b) contributions.

Can my employer match my designated Roth 403(b) contributions? Must my employer allocate the matching contributions to a designated Roth 403(b) account?

Yes, your employer can make matching contributions on your designated Roth contributions. However, your employer must allocate any contributions to match designated Roth 403(b) contributions into your traditional 403(b) pre-tax account.

Can I change my mind and have designated Roth 403(b) contributions treated as pre-tax elective contributions?

No. Once you designate contributions as Roth 403(b) contributions, you cannot later change them to traditional, pre-tax elective contributions.

Can I make a designated Roth 403(b) contribution for my spouse if my spouse has no earned income, as permitted with a spousal IRA account?

No. Although you can contribute to a traditional or Roth IRA for your spouse based on your earned income, you cannot contribute to your Roth 403(b) account for your spouse.

What is a qualified distribution from a designated Roth 403(b) account?

A qualified distribution is generally a distribution that is made after a 5-taxable-year period of participation and is either:

a. made on or after the date you attain age 59½

b. made after your death, or

c. attributable to your being disabled. 

If a distribution is made to your alternate payee or beneficiary, then your age, death or disability is used to determine whether the distribution is qualified. The only exception is when the alternate payee or surviving spouse rolls over the distribution to his or her own employer’s designated Roth 403(b) account, in which case their own age, death or disability is used to determine whether the distribution is qualified.

Is a qualified distribution from a designated Roth 403(b) account included in your gross income?

A qualified distribution from a designated Roth account is NOT included in your gross income.

Is a nonqualified distribution from a designated Roth 403(b) account included in your gross income?

A distribution that is not a qualified distribution will be partially included in gross income if there are earnings in the account.

  • The distribution will be treated as coming pro-rata from earnings and contributions (basis).

  • The 10% tax on early withdrawals may apply to the part of the distribution that is includible in gross income.

What is a 5-taxable-year period of participation? How is it calculated?

The 5-taxable-year period of participation begins on the first day of your taxable year for which you first made designated Roth 403(b) contributions to the plan. It ends when five consecutive taxable years have passed. If you make a direct rollover from a designated Roth 403(b) account under another plan, the 5-taxable-year period for the recipient plan begins on the first day of the taxable year that you made designated Roth 403(b) contributions to the other plan, if earlier.

What happens if I take a distribution from my designated Roth 403(b) account before the end of the 5- taxable-year period?

If you take a distribution from your designated Roth 403(b) account before the end of the 5-taxable-year period, it is a nonqualified distribution. You must include the earnings portion of the nonqualified distribution in gross income. However, the basis (or contributions) portion of the nonqualified distribution is not included in gross income. The basis portion of the distribution is determined by multiplying the amount of the nonqualified distribution by the ratio of designated Roth 403(b) contributions to the total designated Roth 403(b) account balance. For example, if a nonqualified distribution of $5,000 is made from your designated Roth 403(b) account when the account consists of $9,400 of designated Roth 403(b) contributions and $600 of earnings, the distribution consists of $4,700 of designated Roth 403(b) contributions (that are not includible in your gross income) and $300 of earnings (that are includible in your gross income).

Since I make designated Roth 403(b) contributions from after-tax income, can I make tax-free withdrawals from my designated Roth 403(b) account at any time?

No, the same restrictions on withdrawals that apply to the traditional pre-tax contributions also apply to designated Roth 403(b) contributions. Since our plan permits distributions from accounts because of hardship, you may choose to receive a hardship distribution from your designated Roth 403(b) account. The hardship distribution will consist of a pro-rata share of earnings and basis and the earnings portion will be included in gross income unless you have had the designated Roth 403(b) account for 5 years and are either disabled or over age 59 ½. 

Can I take a loan from my designated Roth 403(b) account?

Yes. You can identify from which account(s) in your 403(b) plan you wish to draw your loan, including from your designated Roth 403(b) account. However, you must combine any loans you take from your designated Roth 403(b) account with any other outstanding loans from that plan and any other plan maintained by the employer to determine the maximum amount you are permitted to borrow. The repayment schedule for your loan from your designated Roth 403(b) account must separately satisfy the amortization and payment requirements. 

Can I roll over distributions from a designated Roth 403(b) account to another employer's designated Roth 403(b) account or into a Roth IRA?

Yes. However, because a distribution from a designated Roth 403(b) account consists of both pre-tax money (earnings on the Roth contributions) and basis (Roth contributions), it must be rolled over into a designated Roth 403(b) account in another plan through a direct rollover. If the distribution is made directly to you and then rolled over within 60 days, the basis portion cannot be rolled over to another designated Roth account, but can be rolled over into a Roth IRA. 

Who is responsible for keeping track of the designated Roth 403(b) contributions and 5-taxable-year period?

The Benefits Board is responsible for keeping track of the amount of designated Roth 403(b) contributions made for each employee and the date of the first designated Roth 403(b) contribution for calculating an employee’s 5- taxable-year period. 

Since a qualified distribution from a designated Roth 403(b) account is not subject to taxation, must the distribution be reported?

Yes, a distribution from a designated Roth 403(b) account must be reported on a Form 1099-R. 

Since designated Roth 403(b) contributions are already included as part of wages, tips & other compensation on Form W-2, must designated Roth 403(b) contributions also be identified on Form W-2?

Yes, contributions to a designated Roth 403(b) account must be reported separately on the Form W-2 in Box 12, using the Code BB.

What are the benefits of contributing to a designated Roth 403(b) account versus contributing to a Roth IRA?

Compared to a Roth IRA, designated Roth 403(b) accounts:

  • Roth 403(b) accounts offer larger annual contribution limits than Roth IRAs,

  • Roth 403(b) accounts are not subject to the modified gross income limitations that restrict some individuals from contributing to Roth IRAs, and

  • Roth 403(b) accounts allow participants to keep their Roth and pre-tax retirement savings within a single plan. 

Do the required minimum distribution rules apply to designated Roth 403(b) accounts?

Yes. Designated Roth 403(b) accounts are subject to the required minimum distribution rules that apply to the traditional pre-tax 403(b) plan. In general, if the participant is retired, the participant must start receiving distributions from the plan at age 70½, and annual withdrawals will be required based on his or her remaining life expectancy at the time of the withdrawal. Roth IRAs, in comparison, do not require minimum distributions at age 70½. 

Loans

Who is eligible to apply for a Member loan from the Ministers’ Retirement Plan?

All participants in the Plan are eligible for a Member loan, assuming the other criteria for obtaining a loan is met. 

What is the minimum loan that can be obtained?

The requested loan can not be less than $1,000. The cost associated with funding smaller loans makes such prohibitive. 

What is the maximum loan that can be obtained?

The Internal Revenue Service rules and regulation limit the maximum plan loan to the lesser of the following:

  •  50% of the Member’s account balance, or

  • $50,000. 

How must the loan be repaid and under what terms?

All Member loans must be paid back in at least sixty months (5 years). Repayment can be scheduled over fewer months but can not exceed 60 months. In addition, all payments must be made by automatic bank draft (ACH) deduction. Each participant obtaining a loan will be required to allow for the payments to be deducted out of his or her account on a specific date each month. Insufficient funds in the account on the date of withdrawal will result in the loan being placed in default. Monthly payments can not be made by personal check. 

Is there an application fee for a Member loan?

Yes. Regardless of the loan amount, a $100 application fee will be deducted from the loan principal when it is approved. 

What is the rate of interest charged on Member loans?

The rate of interest will be set by the Trustees of the Benefits Board from time to time. The rate applied to the Member loan will be the rate set by the Board at the date the loan is approved. The rate will remain fixed for the duration of the loan. 

Will all the interest that I repay go into my account?

No. Some of the interest amount will be used by the Board to recoup the costs of offering the member loan program. The participant will be advised during the application process of the applicable interest rate and how much will go back into his or her account and how much will be used by the Benefits Board to cover administrative costs. For example, the interest rate may be set by the Board at 7% with 5% to be returned to the participant’s account and 2% to be used by the Board to cover the expenses of the Member loan program. 

If I am diversified among different investment options offered by the Board, from which account will my loan be funded?

The participant will have the option of choosing to have the loan funded out of the account or accounts he or she specifies, or the participant can choose to have the loan funded proportionately from their different investment accounts following the same formula as is used to put money into their accounts based upon their investment selection form. 

When I repay my loan, how are my payments reinvested?

Loan payments, included both principal and interest attributable to the participant’s account, will be reinvested based upon the participant’s most recent investment selection form, not on which fund the monies came from. 

May I have more than one outstanding loan at a time?

Yes, you may have up to two Member loans outstanding at any time. However, the total of the two loans can not exceed the limits set out above. 

Do I have to pledge additional collateral to obtain a Member loan?

No. The money in your Ministers' Retirement Plan account will serve as the sole collateral for the loan. 

Will the money that I borrow as a Member loan continue to draw interest or have earning like the other money in my account?

No. The money that you borrow will show up on your account as a loan payable. For example, a participant has $100,000 in his account and he takes a Member loan for $20,000. His account will show that $80,000 was drawing interest or had earnings while $20,000 is a loan waiting to be repaid. As noted earlier, all repayments will be drawing interest or earnings after they are received by the Board. 

If I am no longer eligible to participate in the MRP, what happens if I have an outstanding Member loan?

The entire balance of the loan becomes due and payable. If the loan is not repaid upon demand, the loan will be placed into default. 

If I am not able to make the monthly repayment or if I have insufficient funds in my account to cover the repayment withdrawal, what happens to my loan?

Your loan will be placed into default. You will be given the option of making up the past due payments or repaying the entire loan balance. If the default is not cured, the IRS will be notified of your default and you will be liable for income taxes on the outstanding amount, plus you also may be responsible for a 10% IRS penalty tax on the unpaid loan balance. “Non-sufficient” fund fees may also be assessed by the Board. A Member loan should never be taken unless the participant reasonably believes that he or she will have the resources available to make the loan repayments each and every month. 

I am in the military and may be called up for active duty. Are there provisions to defer my loan payments while I am on military duty?

Yes, the loan program will follow the Uniformed Services Employment and Reemployment Act of 1994 (USERRA) and any other applicable laws that apply to those in the Armed Forces of the United States. 

If I am already drawing from my retirement account under an amortized distribution schedule, may I take a Member loan?

No. Participants in distribution are not eligible for Member loans. 

If I change banks during the repayment of my loan, what action should I take?

You should notify the Benefits Board immediately to obtain the appropriate information to provide your new bank so that the monthly drafts can continue uninterrupted. It is the participant’s responsibility to provide the Board with the correct account information. 

Is the interest that I pay towards my Member plan loan deductible on my tax return?

While the Board can not provide legal or tax guidance, interest on loans that are not secured by your residence can not be claimed as a “mortgage interest” deduction. You should seek advice on this issue from your tax professional. 

Will my spouse have to sign for me to obtain a Member loan?

Yes. Your spouse must jointly sign with you the loan application form before your request can be considered. 

How long will it take to process my loan application once it has been received by the Benefits Board?

A participant’s loan application will generally be processed and either approved or denied within ten days of receipt by the Board. If the loan is approved, the loan proceeds will be available within two weeks after the loan is approved. 

Will I be required to sign a legal document before I get a Member loan?

Yes. Each participant taking a loan will be required to sign a promissory note agreeing to repay the amount borrowed. The Internal Revenue Service requires that a formal promissory note be in place as evidence of the loan.

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