The Match Game for 403(b)(9) Retirement Plans

The Match Game show started on December 31, 1962. The premise of the show was simple. The contestant with the most matching answers with the celebrity panelists won the game and moved on to the “big money round”.

Contestant or celebrity, there is another match game that clergy can participate in with their church. Many churches have established 403(b)(9) retirement plans for their employees. The premise of a 403(b)(9) retirement plan is to allow employees and employers to make contributions into a retirement plan.

First, the employee can make elective deferrals into the 403(b)(9) retirement plan. Then, the employer will match the employee’s elective deferral not to exceed the plans specified matching amount. So, how does a 403(b)(9) retirement plan work in favor of the employee?

For example, if your employer matches a maximum of 3% of your $100,000 annual salary, then when you contribute $3,000 in employee elective deferrals your employer will contribute another $3,000 into your account for a total of $6,000. That is a 100% rate-of-return on your $3,000 investment!

Also, the $3,000 elective deferral is not subject to federal income tax, self-employment tax or state income tax. With an estimated combined tax rate of 32.3% (12% federal income tax rate + 15.3% self-employment rate + 5% state income tax rate) a $3,000 employee elective deferral would save approximately $969 in federal and state taxes. If you continue to contribute beyond the employer match, then for every additional $1,000 you contribute this will save you $323 in federal and state taxes ($1,000 x 32.3%).

Are you participating in your church’s “Match Game”?

If you require more specific guidance tailored to your situation, we recommend reaching out directly to Pro Advisor Support. Their team can provide expert assistance and help address any questions.

Clergy Financial Resources
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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com