actuarysmith Posted January 28, 2002 Share Posted January 28, 2002 I am working on a small 403(B) plan for a church. In addition to regular staff, there are three pastors that declare a portion of their income as a housing allowance. Hows does this play into the definition of compensation for the retirement plan? How does it play into any benefit or contribution limits ?( 404,515, etc.) The church board retirement policy has been to fund 6% of pay, based upon gross salary (including the housing allowance). Do you see any problems with this approach? Link to comment Share on other sites More sharing options...
BeckyMiller Posted February 25, 2002 Share Posted February 25, 2002 Actuarysmith - A minister's "parsonage" allowance, while excludible from income, can likewise be counted as compensation for purposes of a qualified plan. Rev. Rul. 73-258, 1973-1 C.B. 194. This is cited as current in the 2002 versions of both the BNA benefits service and the CCH service. I had thought that this had been reversed in the 1996 tax legislation, but... I can't find any reference to it. See Sections 1461 to 1463 of the Small Business Jobs Protection Act for what changes were made. Link to comment Share on other sites More sharing options...
Guest strider Posted February 26, 2002 Share Posted February 26, 2002 As BeckyMiller indicated, the IRS has ruled that housing allowance can be counted as compensation for purposes of a section 401(a) qualified plan's definition of that term, on which contributions are based. I believe that the IRS would reach the same conclusion for 403(B) plans, too. However, housing allowance cannot be counted as compensation (or includible compensation, in the 403(B) world) for section 415 limits testing, to the extent it is tax excludible. Please e-mail me if you have any further questions about this issue. Link to comment Share on other sites More sharing options...
BeckyMiller Posted February 26, 2002 Share Posted February 26, 2002 In the interests of full disclosure - Danny Miller and I may think alike, but we are not related. Link to comment Share on other sites More sharing options...
GBurns Posted February 28, 2002 Share Posted February 28, 2002 Thank God? 1 should have been enough. George D. Burns Cost Reduction Strategies Burns and Associates, Inc www.costreductionstrategies.com(under construction) www.employeebenefitsstrategies.com(under construction) Link to comment Share on other sites More sharing options...
KJohnson Posted February 24, 2003 Share Posted February 24, 2003 Even though Rev. Rul. 73-258 states that a housing allowance CAN be included in the definition of compensation for a 401(a) plan, I assume that you could NOT include it if your plan's definition of compensation was limited to W-2 wages. PLR 200135046 tracks the alternative definitions of compensation in 415 including W-2 Compensation and states that the housing allowance does not fall under any possible 415 definition of compensation. The conclusion is, therefore that you cannot use the housing allowance in your 415 testing. However, I would think that a corrollary to this rule is that if your plan defines compensation as W-2 compensation then you could not use the housing allowance for any purpose? Does anyone have other thoughts? Link to comment Share on other sites More sharing options...
fiona1 Posted August 22, 2012 Share Posted August 22, 2012 Any thoughts on KJohnson's question? Link to comment Share on other sites More sharing options...
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