403(b) FAQ

The church 403(b) plan is a unique retirement account offering minister benefits for pastors, clergy and ministers. Learn more about the qualifications and regulations of the 403(b) plan for churches.

Background Information

The 403(b)(9) Servant Solutions Retirement Plan is a type of 403(b) retirement plan for ministers and employees of plan-approved churches and related organizations. Internal Revenue Code Section 403(b) plans are the most common retirement plan used by not-for-profit employers.

The IRS published regulations that became effective for tax years that begin after Dec. 31, 2008. These regulations apply to all 403(b) retirement plans, including 403(b)(9) church plans. Churches and employers that provide a 403(b) plan for their employees are required to comply with these new regulations. A failure to comply can cause adverse tax consequences for all participants in the employer’s 403(b) retirement plan.

We are committed to helping your organization understand and take the necessary actions to successfully address the regulations. The following questions and answers have been developed to provide you with a general introduction to this important topic that will impact every employer that offers a 403(b) retirement plan.


Q.  Are churches and organizations that use the Servant Solutions Retirement Plan subject to these regulations?

Yes.  But if your church or organization uses Servant Solutions as your sole 403(b) retirement plan provider, the application of these changes will be simplified. If your church or organization allows plan participants to invest with multiple 403(b) providers or to transfer funds to other providers, compliance with these new regulations will be more complex.

Churches are excluded from some portions of the new 403(b) regulation changes. For example, plans of churches are not subject to certain retirement plan nondiscrimination provisions that apply to church-related organizations such as colleges, universities and hospitals.


Q.  What are the IRS regulations for 403(b) retirement plans?

The following list includes a brief summary of the most significant 403(b) regulation changes. For more details, click here. Churches are not subject to all of the regulations. Those marked with an asterisk ( * ) are the regulations that apply to churches participating in the Servant Solutions Retirement Plan.

  • Written plan requirement. Churches and other organizations that provide a 403(b)(9) plan must maintain written documents that describe all material plan provisions. The written plan can incorporate materials from other documents such as written policies, employee handbook, and other related documents.

  • Requirement to follow plan terms. As mentioned earlier, all 403(b)(9) plans must be documented in writing. A failure to follow these written plan provisions can result in adverse tax consequences for individual plan participants and/or all plan participants of the employer, depending upon the nature of the failure.

  • Contract exchanges and plan-to-plan transfers. Participants, employers, and plan providers face strict requirements if a plan allows participants to transfer 403(b) funds in their retirement account from one plan provider to another. Employers with multiple providers will need to have arrangements to share information with all approved providers. In addition, certain participant transactions, including some types of distributions, will now require employer consent.

  • Timing of in-service distributions from employer contribution accounts. This provision impacts plans that allow employees to withdraw employer-contributed dollars while still in service without the occurrence of some event, such as reaching a specified age. Since the Servant Solutions Retirement Plan does not permit in-service withdrawals of employer dollars until participants are 59 1/2 years old, churches that use only the Servant Solutions Retirement Plan already satisfy this new requirement.

  • Universal availability and nondiscrimination requirements. Some 403(b) plans are subject to special rules designed to prevent discrimination in favor of highly compensated employees in design or practice. These requirements are not applicable to churches and qualified church-controlled organizations (QCCOs). They are, however, applicable to non-qualified church controlled organizations (e.g., church-related colleges, universities and nursing homes).

  • Effective opportunity required. This is related to the universal availability provision above and is also not applicable to churches and QCCOs.


Q.  What actions should churches and organizations that participate in the Servant Solutions Retirement Plan take to comply with IRS 403(b) regulations?

Employers must do the following:

  • Develop written policies and procedures. Servant Solutions provides a general plan document for the Servant Solutions Retirement Plan. However, since each organization that participates in this plan has flexibility related to certain plan provisions, your organization must develop and maintain additional written policies and procedures that address:

  1. Which employees are eligible to participate in the retirement plan;

  2. What contributions the employer/church will make on behalf of employees;

  3. Whether the church/organization will use Servant Solutions as the sole provider for the plan or allow multiple plan providers (A decision to allow multiple providers will require the church/organization to enter into arrangements to share information with all approved providers as well as assume responsibility to work with each provider to achieve plan compliance.) With respect to the Servant Solutions Retirement Plan, Servant Solutions has developed documentation templates your church/organization can use to document rules and procedures to enable you to meet the written requirements. Visit this page and select the employer status link applicable to your situation for more specific information regarding the requirements for your organization.

  • Review plan terms. As can be expected, the IRS requires that your organization administer its 403(b) plan in the way it is written. This dovetails with the earlier point that the employer must maintain a written plan that meets certain legal standards. The plan must have all the right provisions and those provisions must be followed. Disregarding this requirement is deemed an “operational failure.” Certain failures by the employer in following the plan could adversely affect every individual for which the failure occurred and/or all of the employers’ plan participants.

  • If your church/organization allows employees to choose among more than one 403(b) provider, you will also have to become familiar with the new contract exchange and plan-to-plan transfer requirements. Visit this page and select the employer status link applicable to your situation for more specific information regarding the requirements for your organization.


Q.  Do the regulations address the time frame in which a participant’s elective deferral must be sent to the provider?

Yes.  The general rule under the regulations is that all contributions must be made to the provider within “a period that is not longer than is reasonable for the proper administration of the plan.” The regulations indicate that employee elective deferral contributions should be deposited in an administratively feasible period, typically within 15 business days following the month in which these amounts would have been paid to the employee if they had not been deferred. The key thought is that the IRS is seeking to ensure that contributions are properly and efficiently handled by the employer from the point of withholding to the point of contribution to the plan.