403(b) versus 401(k)

What is a 403(b) Retirement Plan?

A 403(b) retirement plan:

  • Is typically established by not-for-profit 501(c)(3) employers, hospitals, self-employed ministers, and public education organizations.

  • Allows eligible employees to make salary reduction contributions into the plan on a pre-tax and/or after-tax (Roth) basis. 

If the contributions are pre-tax, earnings within a 403(b) plan accrue on a tax-deferred basis. If they are after-tax (Roth), earnings within a 403(b) plan accrue on a tax-free basis. Certain restrictions apply.

Role of the Employer

Employers offering a 403(b) plan may make employer matching or employer basic (non-elective) contributions to the plan on behalf of the eligible employees. 

As a general rule, the administration associated with a 403(b) plan is less involved than the administration of a 401(k) plan. 

403(b) Plans for Christian Ministries

Today 403(b) retirement plans provide significant benefits and advantages for ministries.

Since Christian ministries often have unique needs, it's important to tailor the retirement plan to those needs. It's also crucial to be aware of, and benefit from, the tax code and the Department of Labor rules.

Some Benefits of a 403(b) Retirement Plan

  • Most plan sponsors are not aware of the specific 403(b)(9) church retirement plan rule that makes the minister's voluntary contributions pre-SECA tax in addition to state and federal income tax.

  • The code allows missionaries working abroad to qualify for the foreign earned income exclusion, which exempts their first $102,000 of earned income from taxes.

  • A Roth 403(b) retirement plan allows missionaries abroad to contribute to a Roth 403(b) resulting in tax-free growth and distribution. A Roth 403(b) is an outstanding savings vehicle for your employees. Are you offering both a 403(b) and a Roth 403(b) plan? This is just one example.

If you're not taking advantage of these benefits now, perhaps a change in providers is necessary.

Learn more about Church Retirement Plans.


Interested in learning more about 403(b) retirement plans? Contact Envoy Financial and one of our specialists would be happy to speak with you.