403b7/distributions as housing allowance at retirement

[Guest statcat]

Good evening folks!

I still want to set up that Vanguard 403b7 for the minister BUT I've heard rumblings (nothing substantiated as of yet) that ministers can only have that benefit of taking their distribution at retirement as housing allowance under 403b9.

Is this right?

I really want to set up as a 403b7 for a number of reasons. He wants mutual funds as his investments, not annuities. The only issue is the distribution at retirement. Obviously we'll have to set it up as a 403b9 if it's the only way to get that benefit of distribution as housing allowance at retirement.

Any out of the box ideas? Letter from church board, for example?

[Guest Geezer]

Good evening folks!

I still want to set up that Vanguard 403b7 for the minister BUT I've heard rumblings (nothing substantiated as of yet) that ministers can only have that benefit of taking their distribution at retirement as housing allowance under 403b9.

Is this right?

I really want to set up as a 403b7 for a number of reasons. He wants mutual funds as his investments, not annuities. The only issue is the distribution at retirement. Obviously we'll have to set it up as a 403b9 if it's the only way to get that benefit of distribution as housing allowance at retirement.

Any out of the box ideas? Letter from church board, for example?

In my opinion, the retired ministers' housing allowance is a privilege granted by the IRS for retirement income received "from a church plan", not the church or convention, or by plan type. It is referenced on page 9 of a current IRS Publication which I have read and printed, but now cannot find. Danny Miller of Connor & Winters, Washington DC wrote in 2007 "The Internal Revenue Service (“IRS”) has determined that a retired minister of the gospel is eligible to claim housing allowance because the allowance is paid as part of his/her compensation for past services as a minister of the gospel. Rev. Rul. 63-156, 1963-2 C.B. 79.".

David L. Ivey

Executive Director

U S Church Benefits Association

Suite 122

7887 San Felipe Street

Houston, Texas 77063-1600

281-413-1690

david.ivey@uschurchbenefits.org

www.uschurchbenefitsassociation.org

[Guest swensen]

My understanding is that funds in any 403(b) can be designated as parsonage. However, the issue is that some "qualified organization" has to designate them. In the case of a 403(b)(9) plan run by a church pension board, the pension board can designate them. If the funds are in a regular 403(b) plan, then the minister's church or some other qualified organization would have to designate them.

[Guest Geezer]

Good evening folks!

I still want to set up that Vanguard 403b7 for the minister BUT I've heard rumblings (nothing substantiated as of yet) that ministers can only have that benefit of taking their distribution at retirement as housing allowance under 403b9.

Is this right?

I really want to set up as a 403b7 for a number of reasons. He wants mutual funds as his investments, not annuities. The only issue is the distribution at retirement. Obviously we'll have to set it up as a 403b9 if it's the only way to get that benefit of distribution as housing allowance at retirement.

Any out of the box ideas? Letter from church board, for example?

In my opinion, the retired ministers' housing allowance is a privilege granted by the IRS for retirement income received "from a church plan", not the church or convention, or by plan type. It is referenced on page 9 of a current IRS Publication which I have read and printed, but now cannot find. Danny Miller of Connor & Winters, Washington DC wrote in 2007 "The Internal Revenue Service (“IRS”) has determined that a retired minister of the gospel is eligible to claim housing allowance because the allowance is paid as part of his/her compensation for past services as a minister of the gospel. Rev. Rul. 63-156, 1963-2 C.B. 79.".

David L. Ivey

Executive Director

U S Church Benefits Association

Suite 122

7887 San Felipe Street

Houston, Texas 77063-1600

281-413-1690

david.ivey@uschurchbenefits.org

www.uschurchbenefitsassociation.org

IRS Publication 517 on page 9 states:

Retired ministers.

If you are a retired minister, you can exclude from your gross income the rental value of a home (plus utilities) furnished to you by your church as a part of your pay for past services, or the part of your pension that was designated as a rental allowance. However, a minister’s surviving spouse cannot exclude the rental value unless the rental value is for ministerial services he or she performs or performed.