Which retirement plan is best for my church?

If you’re like many pastors or church administrators, thinking about your church’s retirement plan is not something you look forward to!

While you may not enjoy thinking about it, you probably recognize that offering church employees a retirement plan is beneficial. Providing pastors and other church employees with the opportunity to save for retirement is a wonderful benefit and shows your staff that you care about their financial wellbeing.

There are several types of retirement plans including 401(k), 403(b), and traditional pension plans. Whether you currently have a plan or not, you may be wondering what type of retirement plan is best for your church.

Without a doubt, the best retirement plan for most churches is a 403(b)(9) plan. In fact, this type of plan is designed uniquely for churches and other organizations with 501(c)(3) church status. Here are some key reasons why this is probably the best type of plan for your church.


  • Increased Flexibility – 403(b)(9) plans do not fall under the Employee Retirement Income Security Act (ERISA) regulations. This fact means that the church can be very flexible with who can participate in the plan. A church could make the plan available to all staff members or only to those they choose or certain groups of people. Additionally, the church can also make different employer contributions for different employees or employee groups. These flexible features are not available to 401(k) plans or other ERISA covered plans.


  • Pastoral Housing Allowance – The housing allowance is a key benefit for pastors or others who are ordained, licensed, or commissioned. This tax-break allows pastors to receive part of their salary as a housing allowance, excluding it from gross income and not subject to federal income tax.The great news about a 403(b)(9) plan is that not only to the contributions go in before taxes but during retirement, the retirement pastor can take some of the distribution as a housing allowance, meaning that these distributions are also not taxed. This is a unique benefit to the 403(b)(9) plan.


  • Tax savings – In addition to the housing allowance, participating in the 403(b)(9) plan has other tax advantages. Contributions can be made pre-tax allowing pastors (and other staff) to reduce their current taxable income. Another tax advantage for pastors is that contributions are made pre-SECA tax. So, for pastors who have not opted out of Social Security this is a 15.3% tax savings.


Find a provider that understands church retirement plans

The 403(b)(9) plan is specifically designed for churches and other organizations with 501(c)(3) church status. It has key benefits for churches and pastors, yet many churches offer a 401(k) or regular 403(b) instead. It may be that the provider who helped set up your current plan does not specialize in church retirement plans and is unaware of all the benefits. Sometimes, church board members or elders advocate for the plan or provider they use in their business. Choosing the wrong type of plan can mean your staff are missing out on the unique advantages such as access to the pastoral housing allowance in retirement.

If you’re looking for a retirement plan for your church, work with a plan provider who understands and can administer a 403(b)(9) plan.


Align your investments with your faith

Did you know that there are churches offering investment options in their plans that actually undermine their faith values? Even in 403(b)(9) plans, pastors and church staff may be unknowingly profiting from abortion, pornography, addictions, and other harmful activities. When looking for a plan provider, look for one that can offer faith-based, or biblically responsible, investment options as part of the retirement plan. Doing so allows your staff to save for retirement and do it in a way that aligns with their beliefs.


Church Retirement Plan Specialists

Beacon Wealth Consultants serves churches and church staff with our Kingdom(b) plan. A 403(b)(9) church retirement plan that includes faith-based investments. If you’re looking for a church retirement plan or want to learn more about including faith-based investments in your plan, schedule a call today!