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Why choose 403(b)7 over 403(b)9?


Guest vinson7
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Guest vinson7

Why would a church choose the 403b7 over 403b9? I know the "9" plan is for church only, but does it have any other benefits to its plan besides that? I can't seem to find anything?

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Guest Danny Miller
Why would a church choose the 403b7 over 403b9? I know the "9" plan is for church only, but does it have any other benefits to its plan besides that? I can't seem to find anything?

A (b)(9) is not limited to registered mutual funds in terms of its investments. In addition, a (b)(9) can "self-annuitize" payments to participants (This is a provision that would typically only be important to a denominational 403(b) plan.) In addition, self-employed ministers and ministers serving outside the pulpit can contribute directly to a 403(b)(9) and deduct such contributions on their tax return pursuant to Code section 404(a)(10). Those are the primary advantages of a (b)(9). The absence of a limitation on investments is the main reason (b)(9) was added to the Code, so that denominational 403(b) programs could provide for their own investment funds, most of which are invested with denominational faith and belief in mind. Hope this helps.

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Guest vinson7

Thanks!! 403b9 is not just for ministers is it? Other employees of the church can contribute, correct?

So really the only difference between the 7 and 9 is the allowable investment choices?

Thanks!!!

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Guest vinson7
Thanks!! 403b9 is not just for ministers is it? Other employees of the church can contribute, correct?

So really the only difference between the 7 and 9 is the allowable investment choices?

Thanks!!!

also, are the contribution limits the same for the 7 as for the 9?

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The same contribution limits apply. The other difference is the document. A church plan sponsor that only provides mutual funds and annuities as investment options [b(7)] is not required to executed a written plan. If they offer investments under b(9), (retirement income accounts), then they must execute a written plan that conforms with the final 403(b) regulations.

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Guest vinson7
The same contribution limits apply. The other difference is the document. A church plan sponsor that only provides mutual funds and annuities as investment options [b(7)] is not required to executed a written plan. If they offer investments under b(9), (retirement income accounts), then they must execute a written plan that conforms with the final 403(b) regulations.

Thanks-

You can discriminate in the 403b9 plan, correct, or does everyone get the same matching contribution amount?

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b7 and b9 do not differ in that regard. If the sponsor is truly a church, then a lot of things do not apply. One of the many things to note is found in Notice 2001-46, article I:

"I. PURPOSE

This notice provides relief from the application of the nondiscrimination requirements of the Internal Revenue Code for certain church and governmental plans.

In particular, this notice extends the effective date of regulations under §§401(a)(4), 401(a)(5), 401(l), and 414(s) of the Internal Revenue Code for nonelecting church plans until further notice, but in no case earlier than the first plan year beginning on or after January 1, 2003."

I have not seen "further notice" in this regard from the IRS yet.

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  • 1 year later...
Guest nielsen522
Thanks!! 403b9 is not just for ministers is it? Other employees of the church can contribute, correct?

So really the only difference between the 7 and 9 is the allowable investment choices?

Thanks!!!

also, are the contribution limits the same for the 7 as for the 9?

The contribution limit for both are just the same.

The IRS created the 403(b) in 1958. In 1974 Congress added paragraph (7) which allowed employees to set up retirement plans directly with mutual fund companies. Prior to this change contributors were limited to investment choices offered by insurance companies. Throughout this site the term 403(b) is intended to mean all of the following: 403(b), 403(b)(7) and TSA.

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