Self-employed ministers and church employees who participate in 403(b) plans generally follow the same rules as other 403(b)
plan participants.
This means that if you are a self-employed minister or a church employee, your MAC generally is the lesser of:
-
Your limit on annual additions, or
-
Your limit on elective deferrals.
For most ministers and church employees, the limit on annual additions is figured without any changes. This means that if
you are a minister or
church employee, your limit on annual additions generally is the lesser of:
-
$ 40,000 ( $41,000 for 2004), or
-
Your includible compensation for your most recent year of service.
Although, in general, the same limit applies, church employees can choose an alternative limit and there are changes in how church
employees, foreign missionaries, and self-employed ministers figure includible compensation for the most recent year of service.
This chapter will
explain the alternative limit and the changes.
Who is a church employee?
A church employee is anyone who is an employee of a church or a convention or association of churches, including an
employee of a tax-exempt
organization controlled by or associated with a convention or association of churches.
Alternative Limit for Church Employees
If you are a church employee, you can choose to use $10,000 a year as your limit on annual additions.
Total contributions over your lifetime under this choice cannot be more than $40,000.
There are two types of changes in determining includible compensation for the most recent year of service. They are:
Includible compensation is figured differently for foreign missionaries and self-employed ministers.
Foreign missionary.
If you are a foreign missionary, your includible compensation does not include contributions made by the church during
the year to your 403(b)
account.
If you are a foreign missionary, contributions to your 403(b) account will not be treated as exceeding the limit on
annual additions if the
contributions are not more than the greater of:
-
$3,000, or
-
100% of your includible compensation.
.
You are a foreign missionary if you are either a layperson or a duly ordained, commissioned, or licensed minister
of a church and you meet both of
the following requirements.
-
You are an employee of a church or convention or association of churches.
-
You are performing services for the church outside the United States.
Generally, only service with the employer who maintains your 403(b) account can be counted when figuring your limit on annual
additions.
