What You Always Wanted to Know But Never Asked About Your ACC Retirement Plan
What kind of plan do we have?
- Defined-Contribution: We often refer to the ACC Retirement Plan as our "Pension Plan" but that is not an accurate description. The word "Pension" refers to something called a "Defined-Benefit Plan" which means that upon retirement an employee would receive a percentage of the compensation from the last three years of employment. Teachers, Federal employees, and former employees of certain sectors such as manufacturing often have "pension" plan. Our plan, however, is different. It is a defined-contribution plan, a type called a 403(b) plan which is similar to a 401k plan found offered by many employers. This type of an account allows money to be placed in an investment portfolio to grow tax deferred until retirement or in a “tax-sheltered annuity contract.” It is similar to a 401K plan, but is governed by different rules. We use the rules (ERISA) that govern 401K’s as a benchmark, in addition to specific rules the IRS has created for 403b plans (specifically for clergy).
- Participant-Driven: Our plan presently allows each participant to choose from a platform of funds designed to provide flexibility in building their own retirement (thus the nomenclature – Participant-Driven Plan). Section 403(b) is the Internal Revenue Code Section, which sets forth the rules for this kind of plan.
Who should members go to with what questions?
- Questions regarding Deposits and Withdrawals, Loans, Retirement (Distributions and Parsonage) Contribution Forms, other Administration questions and PSW questions: call the ACC office.
- Questions regarding your account Balance, Contribution and Investment Allocation, and Planning resources for all of these may be found on Fidelity’s NetBenefits website: www.netbenefits.com/atwork.
- For personalized help and advice beyond standard practice and models, you should go to a qualified advisor whom you trust.
- Questions or concerns about the plan or its administration: call ACC Retirement Plan Chair, David Goldstein.
How did our plan fare over the past 12 months or so? How does this compare to other major plans?
Overall, our plan stacks up well against other plans. The details tell a complete story. Each investment vehicle (Stock Fund, Bond Fund, Blended Fund, and “Lifestyle” funds) in our plan can be compared to a “benchmark” and is ranked by Morningstar.
- Our plan allows for individual choice regarding allocations across the asset classes.
- The average return of the Plan does not necessarily reflect each individual participant’s return.
- It is important to understand your risk tolerance as balanced by your investing time and investing objective.
- The administrative costs of our plan are low in comparison to other plans.
If I invest with the ACC Retirement Plan, is there any way to compare where my money is with other investments? Why should I invest through this plan and not a different one? Where can I find a simple calculator to determine how I am doing?
The Fidelity website provides tools for analysis of Asset allocation, MorningStar reports of Funds (with comparative performance) and daily balances tracking unrealized gains and losses.
- Our plan allows you to choose your investments from a platform the Board of Trustees create.
- Our Plan allows changes at any time.
- Our Plan reports daily.
- We have administrative fee reductions when conditions permit.
- Our Plan allows for loans up to the lesser of $50,000 or half of your balance.
- Our Plan accepts ACC members serving any congregation, school or qualified employer in the United States.
Can someone who is "self-employed" but not declared as their own employer contribute to the plan?
A self-employed cantor or rabbi is treated as his/her own employer. The clergyperson's compensation is his/her earned income from self-employment. If the self-employed cantor makes his/her own contributions, they are deductible under Internal Revenue Code Section 404(a)(10).
Therefore, the self-employed cantor or rabbi would cut a check payable to the plan, and it would go into the pre-tax source.
What is the concern about members who use the 'hardship' rule to prematurely drain their plan?
In addition to the effects of the economic downturn, other hardships have led participants to apply for "hardship withdrawals." While these withdrawals can serve as a last resort or a safety net, it is important to express grave concern here about the use of these retirement assets prematurely, particularly if these funds stand as the only guarantee for a dignified retirement. In some cases, the inability to manage money wisely can result in catastrophic results down the road. If anyone questions their own ability in these matters, please seek out professional financial counseling.
Why do we have a policy on ACH deposits—called the Fidelity Plan Sponsor Webstation or PSW--for contributions to the ACC Retirement plan?
- There are basically two types of contributions: those made on behalf of you by your employers, and those you elect to defer from your salary.
- The employer contributions need to be received and processed no later than November 30th to ensure proper crediting to the account before the end of the year.
- Elective contributions must be received and credited within the pay period of the employee.
There was a change to the IRS regulations in 2009 regarding employee salary deferrals. You are no longer allowed to pre-pay or to pay salary deferrals as “hold for monthly/quarterly payment”. They must be transmitted to your retirement plan account by your congregation in a “timely manner” which the IRS has defined as “before the next payroll.” By your congregation using the PSW system for all of your contributions, your money is invested in a far more timely and secure manner. PSW eliminated the “middleman” of the ACC office handling your contributions.
ACH is presently the most efficient way available for us to make both of these types of contributions. It remains your responsibility to verify each deposit. Your contribution is usually posted to your account two (2) business days following the submission. You should log into www.netbenefits.com/atwork to verify your deposit has been completed.
By what date does an annual employer contribution need to be made?
The contribution must be processed before the end of the calendar year to qualify in that year. (e.g. 2016 contribution must be received and processed before 12/31/2016). We aim to use an earlier date to ensure proper crediting. If your congregation is unable to make your retirement plan contribution in a lump sum, they must speak with the ACC staff to arrange for a payment plan. As stated above, your salary deferral contributions must be made to the plan after each payroll.
I didn’t receive a new retirement plan calculation contribution form. Where do I find it?
The most current form is available on the Forms, Investment Options and IRS Limits page.
I am in a limited-service position; what is available to me? What can I expect to receive in terms of retirement benefits?
Limited-Service does not preclude one from participation in the Plan, the willingness of the individual/Congregation to make contributions is all that is required.
What is the Supplemental Plan?
While not as common an issue today, the Supplemental Plan was created to receive contributions that exceeded the limits set by the IRS. The limits are much higher now than they were twenty years ago when the plan was created. As a result, very few of our participants utilize this part of the plan beyond the money that remains from earlier in their career. (Note: Parsonage may be taken from Supplemental Plan beginning in 2018).
Why is it so important to participate in this plan? I am only 27 years old; why do I need a retirement account?
The more one saves over a longer period, the better the long term chances for help in retirement. The best success to have sufficient funds for parsonage from your congregation in retirement are to negotiate to receive a 15% - 18% contribution annually on your behalf and do everything possible to leave that contribution invested in the plan throughout the years you are working (avoid taking loans against those funds). There are several resources on the member's only Contract Support pages that can help you understand the need to participate in a retirement plan from the start of your career.
How much money am I losing at retirement if I contribute less than 15% annually?
It is hard to quantify your loss. The less you put in for a shorter period the less you are likely to have when you need it in retirement. There are several resources on the member's only Contract Support pages that can help you understand the need to participate in a retirement plan and how different contribution levels may impact the balance of your plan when you retire.
What is the benefit to me of contributing an additional 3% over my congregation’s contribution? Can I exceed 3%?
The more one saves the better positioned one will be to fill future needs. The IRS sets annual limits for the amount of money you are allowed to set aside in your retirement plan. Please check with your financial advisor for the current IRS limits. For 2016, the limit for employee contributions (salary deferrals) is $18,000 if you are under age 50 or $24,000 if you are over age 50 and are eligible for the “catch up” contribution.
Is there a pamphlet that I can present to my congregation on the importance of annual contributions to my retirement account?
Many of our members are being asked to take cuts/freezes in their compensation packages. Many of us have opted to (or had our congregations) lower or eliminate our retirement contributions for one, two or a number of years. Please be advised that the ACC strongly discourages that practice. Your retirement funds are the most expensive monies that you can return. Take the case of a 45-year-old cantor who plans to retire at age 65. A $5,000 reduction in just one year of her contract would result in a $23,305 loss upon retirement (assuming an 8% return on investment). If that $5,000 reduction continues each year until retirement, the loss grows to $247,115.
Therefore, the ACC has obtained the assistance of attorney, Michael Gan, who has written a fine position paper for the CCAR, and now for the ACC on presenting the case for NOT cutting any retirement payments, even in this economy. He explains why it is not only a moral decision but why, in the end, it does not make sense for the congregation. We now have a copy of that article available to ACC members on our website along with “talking points” that you can use in your discussions with your congregation. Michael Gan is an attorney with the law firm, Peer, Gan and Gisler in Washington, DC, and is also the son of a Reform Rabbi. His practice includes the negotiation clergy contracts. His article is available on the Contract Support page of the website.
Any Investment house has brochures speaking to this issue. Fidelity has one as well.
I work outside of the United States. What retirement resources are available to me?
Retirement plans/accounts are governed by the Laws of the Land. We are not able to accept money from colleagues who are working exclusively outside the country. Any funds already invested in the ACC Retirement Plan are not affected by the current employment status.
What is the definition of Retirement, in terms of this Plan?
Our plan is a 403(b) Qualified Church Plan. Like an IRA or 401(k) the money invested is tax deferred. The intent of the account is to help offset future costs of living when one retires. Due to the special nature of the plan as a Qualified Church Plan, money withdrawn from the plan may be used as parsonage governed by the same rules that apply while ordained clergy is employed by a congregation.
I am retiring. How do I manage the disbursals from my account in such a way that I can claim parsonage and so that I don’t run out of money? How are disbursements made from my account?
Your disbursements should be made with the thought that you will need money for housing each year. Know your costs and allocate accordingly. Remember that funds from other sources (i.e. savings, IRA’s, 401k’s, Social Security, ACC Supplemental Plan funds) do not qualify for parsonage.
What happens to my account upon my death?
You should have designated at least one beneficiary. Your assets would then go to that individual after they complete and submit a beneficiary claim form and original death certificate to Fidelity Investments. You can also name a trust, an organization, or an estate, or a combination of any one of the beneficiary types. It is important that these issues are planned. If you are unsure of your current beneficiary, please check with Fidelity by phone or via your NetBenefits account online.
Please explain the role that Fidelity plays in this plan.
Fidelity Investments is our fund holder or investment vehicle provider. They provide access to a host of fund options from which the ACC Retirement Board of Trustees selects funds that meet a predetermined set of criteria. Fidelity serves as our recordkeeper, tracking the flows of money in and out of accounts and funds within the accounts as well as loans made to individual participants.
Fidelity is not an independent financial advisor. The information they provide you via NetBenefits and during in person meetings at ACC convention or via phone is intended for educational purposes only. For in-depth financial advice and information, it is recommended that you seek the services of an independent financial planner—especially one well versed in clergy retirement. It is important to remember when meeting with a Fidelity Retirement Planner you will need to bring your account login information and most current statements.
About Our Board
What is the ACC Retirement Board (a.k.a. Board of Trustees)?
The ACC Retirement Board is a body of appointed individuals charged with oversight of the administration of the ACC Retirement Plan, including all printed and electronically generated material and other member services.The ACC Retirement Board oversees and reviews the Fund Platform (funds offered as investment possibilities). From time to time, the ACC Retirement Plan Board reviews requests made by individual plan participants.
The ACC Retirement Plan Board is also responsible minimally for an annual report on the Plan to the ACC Executive Board. Customarily, there is an update from the Retirement Board at every ACC Executive Board meeting and during the annual ACC Convention. As well, the Retirement Plan Board, with the help of legal counsel, makes recommendations to the Executive Board concerning changes to the Plan Documents (changes based on unforeseen circumstances or changes in New York or US laws governing 403b plans or non-profits)
What is the composition of the ACC Retirement Plan Board?
Presently, there are eight regular members of the ACC Retirement Plan Board of Trustees. Each trustee serves by appointment of the ACC Executive Board. The Retirement Plan Board elects a Chair from amongst its membership. The present make-up of the ACC Retirement Plan Board: 5 Regular Members of the ACC and 3 Financial Industry Professionals. Ex-Officio members include: a Plan Administrator, Legal Counsel, ACC Chief Operating Officer, and ACC Executive Board Officer.
- Phyllis Berman
- Dennis J. Drescher
- Steve Sacks
What is the role of the Chair?
The present duties of the Chair are as follows:
- Meetings: The Chair runs all meetings of the ACC Retirement Plan Board including establishing agendas, coordinating participants’ attendance and ensuring that items requiring action have sufficient time to process and resolve.
- The Chair serves as the point person for administration oversight on the Retirement Board. This includes the work of all service providers to the Plan (Fidelity, Legal Counsel and our Plan Administrator).
- The Chair periodically helps to facilitate resolution of questions/problems of individual participants, sometimes acting as the first point of contact.
- The Chair routinely meets with representatives from Fidelity concerning ongoing analysis of our Fund platform.
- The ACC Retirement Plan Board, with the Chair, has the responsibility to ensure that the administrative budget of the Plan is in line with the Retirement Plan Board’s directives.
- The Chair meets monthly with the Plan Administrator to review the administrative aspects of the Plan.
- The Chair participates in periodic educational sessions including a yearly presentation to the Senior Class at HUC-JIR-DFSSM.
- The Chair reports to the ACC Executive Board concerning the operation and needs of the Plan. This generally occurs in the fall, in the spring and at the annual convention of the ACC.
How often does the ACC Retirement Plan Board meet?
The Board has one scheduled in-person meeting per year. This meeting is held in a location agreed upon by ACC Retirement Plan Board members. Retirement Board Members, Ex-officio members and service providers (presently Fidelity Investments) attend the meeting. We periodically invite other providers as needed to ensure additional levels of oversight and independence (e.g. Evaluation Associates (An independent firm that specializes in evaluating 403b/401k plans). We also meet as needed by phone to address a variety of issues relating to the performance of our funds or special requests by participants of the plan. During the course of the year we address the daily business via e-mail, including required votes on individual requests.
What is the relationship between the ACC Executive Board and the ACC Retirement Plan Board?
The ACC Executive Board is the sponsor of the Plans. The ACC Executive Board appoints Trustees to the ACC Retirement Board. The ACC Executive Board charges the Retirement Board with the responsibility of operating the plan and reporting the needs of the plan to ensure proper functioning.
Parsonage in Retirement - Top 10 Questions and Answers
Before retirement, every cantor must know how to retain the parsonage allowance in retirement. This document should assist you in gathering that information. Occasionally, retired members of the ACC have questions regarding non-taxable distributions for parsonage from the ACC Retirement and Supplemental Plans. While we cannot address the particulars of any individual’s tax situation, this article explains our understanding of the federal tax laws as they relate to housing allowances provided to retired cantors.
This is not intended to be tax advice and you should consult your own legal and tax advisors for information about your particular tax situation.
What are the general rules of parsonage?
Pursuant to Section 107 of the Internal Revenue Code, a “minister of the gospel” (which includes a cantor) may exclude from gross income:
- The rental value of a home furnished to him as part of his compensation; or
- The rental allowance paid to him as part of his compensation, to the extent used by him/her to rent or provide a home and to the extent such allowance does not exceed the fair rental value of the home, including furnishings and such appurtenances such as a garage, plus the cost of utilities.
- The IRS regulation requires that the home or rental allowance be provided as remuneration for services that are ordinarily the duties of a minister of the gospel. The Tax Court has ruled that the parsonage allowance exclusion is limited to the amount used to provide the home, if that amount is lower that the fair rental value of the home. [Warren v. Commissioner, 114T.C. No 343 (2000), appeal dismissed 302F. 3d 1012 (9th Cir. 2002).] Although parsonage is not able to be included in income for federal income tax purposes, it is considered self-employment income for SECA purposes prior to retirement.
Are cantors “Ministers of the Gospel”?
Yes, a cantor is a “minister of the gospel” for purposes of section 107.
Are retired cantors eligible for parsonage?
According to the IRS Revenue Ruling 63-156, the rental value of the home furnished or the housing allowance paid to a retired minister as part of his compensation for past services is excludable from income under section 107 of the Internal Revenue Code with proper designation.
What is proper designation?
The parsonage allowance exclusion is allowed only if the allowance is officially designated as a housing allowance before it is paid. The designation must be made by the employing church or other organization. The designation may be evidenced in an employment contract, minutes of the church, etc., resolution or other official instrument such as an employer’s budget.
Where a retired cantor’s relationship with his former employer is completely severed, the designation of a portion of a clergyperson’s retirement funds in a qualified church plan as a rental allowance may be made by duly appointed retirement trustees. This is why the ACC Retirement Plan Administrator requests parsonage information from each retired plan participant. Prior to the beginning of each taxable year, the ACC Retirement Plan Trustees review and officially “designate” the parsonage each retired member has certified as being an excludable parsonage distribution for that upcoming year. The designation, which is reflected in the minutes of the Trustees’ meeting, is intended to satisfy the IRS requirements that the allowance be officially designated. However, each cantor is responsible for determining whether the amount requested does not exceed the lesser of the fair rental value of the home or the actual cost and bears the responsibility for substaniating these costs to the IRS.
Is a retired cantor's widow/er eligible?
No, the exclusion does not apply to a rental allowance paid to a retired minister’s widow/er.
Is it possible to take parsonage from more than one source?
Yes, as long as the parsonage is officially designated and the total does not exceed the allowance. Only "church plans" can designate parsonage.
What is the ACC Plan procedure for designating parsonage ?
- In the fall of each year, the Retirement Administrator sends all known retirees a “Parsonage Transmittal Form,” to be completed and returned prior to the annual meeting of the Trustees which normally takes place by the end of November.
- At the annual meeting, the Trustees review and officially “designate” the parsonage certified by each retired member as being an excludable parsonage distribution for the upcoming taxable year.
- This designation, which is reflected in the minutes of the Trustees’ meeting, is intended to satisfy the IRS requirements that the allowance be officially designated. However, each cantor is responsible for determining whether the amount requested does not exceed the lesser of the fair rental value of the home or the actual cost.
- If you are planning to retire and begin receiving distributions from the Plan, you should contact the Retirement Administrator to obtain a transmittal form to inform the Trustees of the amount of parsonage expenses you expect to incur during the calendar year. Your transmittal form must be returned to the Plan in sufficient time for the Trustees to act before you begin receiving distributions which you would like to have treated as parsonage. Otherwise, any distributions you receive prior to the Trustees designation of your parsonage will be fully taxable to you under Federal income tax rules.
It is important to stress that you cannot exclude Plan benefits from taxable income simply because they have been designated as parsonage under the procedures outlined above. The parsonage designation is the first step. After a parsonage designation has been made on your behalf, you can then exclude from taxation only those benefits that have been designated as parsonage to the extent you have actual parsonage expenses, as indicated above. In this regard, it is suggested that you contact your individual tax advisor to determine exactly what you can claim as parsonage expense. If, at the end of the calendar year, you determine that your actual parsonage expenses are less than the amount you estimated on your transmittal form, please inform the Plan Administrator.
How do I request a parsonage distribution?
You must contact Fidelity Investments directly at 1-800-343-0860 to initiate distributions from your account and be sure to inform the representative your distribution will be for parsonage/housing allowance. If this is your first distribution from the plan, you will need to complete a Fidelity distribution form and return the form to the Plan Administrator for plan sponsor (ACC) approval. The plan sponsor will submit the completed signed form to Fidelity for processing. You should consider establishing an ACH payment method with Fidelity so all distributions can be deposited directly to your bank account on file.
Can I take a parsonage distribution from my Supplemental Plan?
Yes. Beginning in 2018, parsonage distributions are allowed from both the ACC Retirement Plan and the ACC Supplemental Plan.
Must my minimum required distribution (MRD) be separate from parsonage distributions?
Your MRD and parsonage distribution may be the same. The IRS requires that your take a minimum distribution but does not require that the distribution is taxable.
- Parsonage may be taken from the ACC Retirement Plan, and beginning in 2018, the Supplemental Plan.
- Transfers in from other pre -tax employer plans, such as a 401k or IRA are permitted but are not eligible for parsonage.
- Transfers from another 403b church plan to the ACC Retirement Plan may qualify for Parsonage if the source is documented as from a congregation or other 403(b) qualified church plan.
- ACC Associate Members and GTM members, though they may participate in the ACC Retirement Plan may not receive parsonage in retirement if they have not been ordained from a seminary recognized by the ACC Executive Board; the ACC Retirement Plan Board does not grant clergy status
The group Insurance benefits offered by the American Conference of Cantors are no longer a part of the ACC Retirement Plan and are under the purview of the ACC Executive Board.
What is the disability insurance through the ACC?
Our Long Term Disability Plan provides the important characteristic of covering one’s own occupation (in our case the plan covers our voices) for a two-year period. All other disabilities are covered for an extended period up to age 65.
If I have to go on disability, what happens to me during the waiting period?
Planning is important. You should have some portion of sick leave in your contract. You should establish an emergency fund (rule of thumb: ½ to 1 year salary). Consider enrolling in a short-term disability insurance plan to pay a portion of your income for a short period of time after you run out of sick leave.
FAQs as of September, 25, 2017