403(b)(9) Accounts - Real or Urban Legend?

[Guest Patrick Foley]

Code section 403(b)(9) permits churches to set up "retirement income accounts" that sound like 403(b)(7) accounts without the 403(b)(7) restriction to mutual funds. I have church clients thinking and talking about 403(b) and this seems like an option to discuss. But has anybody seen a live one?

[Appleby]

No. But I have seen 403(b)(7) masquerading as 403(b)(9)…True story...If you say I said that, I will deny it

[MWeddell]

Yes, I have two church clients that use 403(b)(9) accounts. We saw the advantage as being able to obtain a diversified stable value fund instead of a guaranteed account that was guaranteed by just one insurer and that tended to be less liquid if we ever changed providers.

[mbozek]

There are several very large 403(B)(9) funds run by churches. I think the Baptist church is one. The funds are operated as a trust with professional investment managers. In order to make it work the sponsor will need a large amount of initial capital to invest to pay for the start up expenses and mgt fees.