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.  If you are not able to find an investment agency to set up a 403-b for you or your investment agency requires you to hire a TPA (third party administrator) to write the plan document, give our office a call and we can recommend someone.