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   Plan Design Elements:
     401(k) vs 403(b)
     Investment Options
     Roth
     Auto Enrollment Plus
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Plan Design Elements

This section of the website discusses the importance of Plan Design for any retirement plan.  This page includes a philosophy of Plan Design as well a discussion of plan tax types.  Other pages in this section provide information on various plan design elements you may include in your retirement plan.  Click on the links to the left to view any of the additional pages.


Philosophy of Plan Design: When retirement plans are designed well, Christian Ministry Professionals (CMPs - your employees) can be well supported and significantly encouraged.  Here are some guidelines to an effective plan design.  A good retirement plan must:

  1. Encourage total participation.  This is the first step toward understanding stewardship responsibility.  Many CMOs (Christian Ministry Organizations) provide a basic retirement plan contribution percentage or dollar amount to every CMP ranging from 1% to 5% of salary. CMPs must then connect to this part of the long-term stewardship process.

  2. Encourage individual participation.  Encourage participant involvement.  Many CMOs provide a matching component to their plan, which encourages CMPs to commit some of their own resources, not just those of the ministry.  A matching component can range from 2% to 5% plus and is usually done on a dollar-for-dollar basis.  Now the participant has some of their money in the process. They are engaged.

  3. Encourage individual planning.  Encourage participant commitment.
    1. Voluntary contribution options allow greater discretion for how resources are set-aside for the future.
    2. Allowing a Roth 403(b) for U.S. and internationally-based employees on a salary deduction basis adds to the CMP’s planning options.
    3. Allowing tax-free salary deduction or education savings plans are also options to the planning process.

 

Plan Tax Type:  For most Mission and Church organizations, the 403(b) plan works best.  Key highlights of this plan include:

  1. For those with ministerial status, the 403(b) allows contributions to be pre-SECA, federal and state taxes.
  2. For those who qualify for a housing allowance, the distributions at “Retirement,” can be made as part of the housing allowance.  In this case, no tax is paid when invested or when accessed at retirement.
  3. There is total flexibility for employer and employee contributions, up to very liberal limits.


Other Key Elements:

  1. Auto Enrollment: Encourages your staff and clearly demonstrates your commitment to this benefit.  Generally we recommend only enrolling the staff in the basic, or employer contribution portion or the plan.  This leaves the matching and voluntary element participation decision to the participant.  These additional pieces are then covered during the one-to-one conversations with an Envoy Lifestage Specialist.

  2. Roth Tax Option: Provides a tax-planning option and encourages the participant to understand the tax implications of the decisions they make. Roth contributions are after-tax and grow tax-free.  For those with ministerial status, it still reduces the SECA tax just as the traditional tax treatment does for participant contributions only.

  3. Diversified Investment Options: Cost-effective investment options from multiple asset classes, using a variety of mutual fund families including fixed options for those who are totally risk adverse, target maturity funds to use with the auto enrollment, and elements of the Integrity Collection to encourage faith-based investing.

 

For more information on how Envoy Financial can serve your ministry, contact Jeff Gater at (888) 879-1376, ext. 209 or by email.

 

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