Can a Pastor Have a 401(k) and a 403(b)?

Bi-vocational pastors make up a sizeable minority of pastors in America – 26% according to a 2019 Barna survey. This means that 26% of pastors have another paid or unpaid role in addition to pastoring a church. For those employed by a church and another employer it raises the question: can a pastor contribute to a 401(k) and a 403(b)?

The short answer is yes, a pastor can contribute to both types of retirement plan. There is no rule or regulation preventing it. However, for pastors who want to contribute to both, there are some additional considerations.


IRC Section 402(g) deferral limits

The IRS limits the amount you can contribute to your plans. For 2022, the 402(g) limit is $20,500 (plus $6,500 catch-up if you’re aged 50 or older). The catch here is that the limit applies to the total contributions to all plans. So for the pastor in this situation, it isn’t $20,500 for the 401(k) and $20,500 for the 403(b), it is $20,500 total. If a pastor contributed the whole $20,500 to a 401(k) plan for 2022 they could not contribute to their 403(b).


IRS Section 415 contribution limits

In addition to the 402(g) limit described above, the IRS also limits the total contributions to the plan – employee and employer contributions combined. For 2022, these contribution limits cannot exceed the lesser of:

  • 100% of employee compensation, or
  • $61,000 (or $67,500 with the catch-up contribution)

For a bi-vocational pastor, this might become an issue if one of the jobs had low compensation. For example, if the pastor worked a few hours a week for a company and earned $15,000 a year then the total contributions (both theirs and the employers) could not exceed this amount.


Choosing which plan to contribute to

With the option of contributing to two different retirement plans, a bi-vocational pastor can decide how best to allocate their contributions. Some things to consider:

Do any of the plans offer an employer match? If so, the pastor might consider contributing enough to get the full employer match. Who wants to leave money on the table?

Are the 403(b) contributions subject to the pastoral housing allowance? If so, the pastor might consider favoring this plan as the housing allowance will also apply to distributions during retirement. Who doesn’t want to save more on taxes?

Every situation can be different so if you’re a bi-vocational pastor trying to figure this out, you may want to enlist the help of a fee-only Christian financial planner and a Christian accountant who can help evaluate your individual situation and provide prudent advice.

Beacon Wealth Consultants is a Christian fee-only financial planning and investment management firm. Using a biblical stewardship framework, we help pastors and others develop a plan to reach their financial goals. We also help churches and Christian business owners offer 403(b)(9) and 401(k) plans that feature faith-based investments. Give us a call, we love helping churches and pastors!