Housing Allowance: Are you throwing away free money?

Housing Allowance: Are you throwing away free money?

When an ordained, licensed, or commissioned minister receives a portion of their compensation as housing allowance, that portion is excluded from gross income and therefore not subject to federal income tax. This can represent substantial tax savings for the minister. Further, when an ordained, licensed, or commissioned person retires, a portion of their 403(b)(9) retirement plan distribution can be received as housing allowance, providing additional tax savings in retirement.

Housing Allowance After Retirement

What Are The Special Requirements for Housing Allowance After Retirement?

To take a distribution with special housing allowance tax treatment, you must be at least age 59½ and receive a Housing Allowance Authorization Letter from your church or governing organization.

Housing Allowance Distributions

You can request one distribution and have a portion of that distribution be treated as housing allowance and another portion a regular distribution. You will receive one check or one electronic payment (ACH) for the total amount of the distribution less any elected tax withholding.

You may designate a percentage to be withheld from any taxable portion of your distribution, but you will be responsible for any estimated tax and any penalties incurred as a result of that decision.

Making Changes to Your Special Housing Allowance Tax Treatment

You are responsible for submitting a new Distribution Authorization Form—Special Housing Allowance Tax Treatment to Envoy. If you do not submit a new Distribution Authorization Form—Special Housing Allowance Tax Treatment to Envoy, your original Housing Allowance amount as elected on the form will continue from one tax year to the next for recurring payments.

Your payments will continue until you stop the payment or until your account balance is depleted. If you wish to stop payments, please contact Envoy.

Can You Take a Housing Allowance Distribution if You’ve Rolled Over to an IRA or 401(k)?

No, this is why it is important for pastors to keep their money in a 403(b) and not rollover into an IRA or 401(k).

However, if you get a new job, you can roll back into a 403(b), and then have housing allowance eligibility.

Click here for more Housing Allowance questions and answers.


To learn more about housing allowance, download our FREE Housing Allowance eBook.

Envoy does not offer legal or tax advice and encourages that you consult with a lawyer and/or professional tax advisor for personalized tax advice.

12 Things Plan Sponsors Need To Know

12 Things Plan Sponsors Need To Know

Executive Pastors, Business Managers, Board Members, CEO’s, COO’s, and HR Directors associated with Non-Profits are often in the dark when it comes to understanding retirement plans. Often this includes those who are directly responsible for the oversight of their plan or charged with the responsibility of setting up or finding a new vendor.

How a Trip to Starbucks Can Improve Your Future

For many of us, spending $3-$5 a few days a week on good coffee doesn’t seem like a big expense.

However, it does add up over time. Saving $25 a week over 30 years is close to $40,000.

Don’t leave yet! We’re NOT suggesting that you give up your Starbucks.

If you don’t have a problem spending $20-$30 a week on a beverage, why not do the same for your future? Match your coffee spending with a retirement contribution. Again, calculate $25 a week over 30 years but now invested in a retirement account yielding 6% annually.

The total would be over $100,000!

Like little spending, little bits of saving can really add up over time. This year, try matching a retirement contribution with another area of spending that doesn’t seem like much.  Could be coffee, movie rentals, or your cell phone bill. And, don’t forget the reason we save: to be financially free to do whatever or go wherever God calls us in our last quarter.

Discover more about funding your future by going to http://www.futurefundedministry.com/.


How Does the Minister’s Housing Allowance Impact Your Retirement?

How does Housing Allowance Impact Your Retirement?

  1. During your active ministry years, you pay significantly less SECA (The Self Employment Contribution Act) tax. Make sure you save the difference and set it aside in your retirement plan.

  2. During your retirement years you can take distributions equal to your housing allowance from your 403(b)(9) retirement plan without paying taxes. Functionally, this is an increase in compensation equal to your tax bracket—maybe as much as 25% at that point in time.

All voluntary contributions you make to your 403(b)(9) retirement plan reduces your SECA tax as well as your state and federal income tax. The SECA tax is paid by those with ministerial status who have not opted out of Social Security. For those who have not opted out, the increased savings is in the 15.3% range, in addition to normal retirement savings. Again, this provides an immediate tax savings of about 15.3%. Make sure to reinvest those tax savings back into your 403(b)(9) retirement plan account.

What Are The Special Requirements for Housing Allowance During Retirement?

To take a distribution with special housing allowance tax treatment, you must be at least age 59½ and receive a Housing Allowance Authorization Letter from your church or governing organization.

Click here for more on Housing Allowance during retirement.


To learn more about housing allowance, download our FREE Housing Allowance eBook.

Envoy does not offer legal or tax advice and encourages that you consult with a lawyer and/or professional tax advisor for personalized tax advice.

Special Taxation Considerations for Pastors

The Minister’s Housing Allowance is one of the greatest tax benefits available to ordained, licensed, or commissioned ministers and comes from Section 107 of the Internal Revenue Code.

When an ordained, licensed, or commissioned minister receives a portion of their compensation as housing allowance, that portion is excluded from gross income and therefore not subject to federal income tax. This can represent substantial tax savings for the minister. Also, when an ordained, licensed, or commissioned person retires, a portion of their 403(b)(9) retirement plan distribution can be received as housing allowance, providing additional tax savings in retirement.

Envoy has extensive experience with housing allowance for ministers and is committed to protecting this important benefit. We have developed tools to make it easy for ministers to maintain their housing allowance.

Further, the SECA tax owed by those with ministerial status is reduced by the amount contributed to either a Traditional or Roth 403(b)(9) plan. Envoy is committed to protecting and ensuring that your tax and retirement plan benefits are truly there for you during your active service years and beyond.

Click here for more Housing Allowance questions and answers.

What Are The Benefits Of A Roth IRA Or Roth 403(B) Plan?

If you don’t have a 403(b) or 401(k) plan available, fund an IRA. Many small employers, ministries, or faith-based organizations don’t have the money or experience to offer a retirement plan at all, let alone one with either a basic or matching contribution. This means you have to start your own retirement plan. Like the 403(b) or 401(k), an IRA can accommodate either pre-tax contributions (you save taxes now) or Roth contributions (you save taxes later). 

Roth Benefits

The benefits of a Roth 403(b) and Roth IRA are that principle and earnings grow tax free so there will be no taxes taken at the time of distribution if you are at least 59 1/2 and have had the Roth account for 5 years.

If you do not have access to a Roth 403(b), then a Roth IRA is the next best choice. The Roth 403(b) allows you to contribute more, but contributing up to the IRA limit is better than not contributing at all.

Learn more about Church Retirement Plans.

Along with faith-based retirement plans, Envoy also offers faith-based IRAs.

Are Your Legally Mandated Oversight Requirements Being Met?

Are Your Legally Mandated Oversight Requirements Being Met?

A Retirement Plan Oversight Committee is a wise and effective way to help ensure that the legally mandated oversight requirements are being met. The new IRS 403(b) regulations have been touted as the most significant piece of legislation in the last 40 years for 501(c)(3) organizations.

Why Ministries Should Consider a 403(b) Plan

Why Ministries Should Consider a 403(b) Plan

Today 403(b) plans provide significant benefits and advantages for churches, parachurch, and mission sending organizations.

Since Christian ministries have different and unique needs, it's important to tailor any retirement plan and to be aware of the tax code and the department of labor rules. Not only to be aware but to benefit from them.

Understanding ERISA Versus Non-ERISA Retirement Plans

ERISA Plans

ERISA organizations are subject to the rules promulgated by The Employee Retirement Income Security Act of 1974 (ERISA). This Act identifies reporting requirements, fairness procedures, and fiduciary requirements that plan sponsors and other fiduciaries must follow when setting up a retirement plan. These requirements are considered “best practice” for all organizations; however, these requirements do not directly apply to Non-ERISA Plans.

The primary functions of ERISA include: 

  • Requiring the disclosure of financial and other information concerning the plan to Participants and their beneficiaries; 

  • Establishing standards of conduct for fiduciaries; and 

  • Providing for appropriate remedies and access to the federal courts.

Non-ERISA Plans

Non-ERISA plans are those 403(b) plans that involve voluntary plan participation only. In other words, the employer is not contributing. Another parameter around this distinction is that all Church Plans are considered Non-ERISA.

Therefore, if your organization is a church, you want to ensure that you have a 403(b)(9) Church Plan. If your organization is not a church, and makes plan contributions of any kind (also known as “matching”), your retirement plan falls under the ERISA oversight rules. We hasten to say, that the ERISA regulations are very informative and add a high protection value to either a 403(b) or 401(k) Plan.

Non-ERISA plans need to conform to the 403(b) regulations as established by the Internal Revenue Service.

ERISA plans need to conform to the 403(b) or 401(k) regulations as established by the Internal Revenue Service and the ERISA regulations as established by the Department of Labor. 


Learn more about Church Retirement Plans.

What is a 403(B)(9) Retirement Plan?

You may already know what a 403(b) retirement plan is and why you might choose it over a 401(k) plan. But do you know what a 403(b)(9) plan is? How do you know if it’s right for your ministry?

Simply stated, 403(b)(9) plans are for churches, or those with 501(c)(3) church status, while 403(b) and 403b(7) plans are for everyone else. There is no reason to use a 401(k) plan when you are a non-profit 501(c)(3)—church or not.

What Are the Benefits of a 403(b)(9) Plan?

One of the biggest benefits of 403(b)(9) plans is that they offer the Minister’s Housing Allowance distribution at retirement. This allows a minister who is ordained, licensed, or commissioned to receive a designated portion of their salary that is excluded from gross income and not subject to federal income tax.

403(b)(9) Plans are also not subject to certain ERISA requirements.

Not sure if you have a 501(c)(3) church status?

Reference your determination letter from the IRS. This notification will state whether you are classified as a church under section 501(c)(3) of the Internal Revenue Code.

Learn more about Church Retirement Plans.

What Are the Requirements to Receive Housing Allowance?

In order to receive the Minister's Housing Allowance, you must be an ordained, licensed, or commissioned minister. 

Each year, you need to provide Envoy with a Housing Allowance Authorization letter from your organization (on letterhead), signed by an authorized individual, and  indicating the amount of Housing Allowance approved for the year. The letter must be dated by December 31st of the previous year, but the letter can be handed in later than that.

Whether the minister owns or rents a home, it is essential that his or her employing organization designate a housing allowance. Housing allowances must be:

  • Adopted by the organization board or leadership

  • Recorded in written form (such as minutes)

  • Designated in advance of the calendar year

However, organizations that fail to designate an allowance in advance of a calendar year should do so as soon as possible in the new year. The allowance will operate prospectively.

What You Need to Know About Housing Allowance

  • Housing allowance cannot exceed the lesser of 100% of compensation or actual housing expenses. If you want to take more than your housing allowance limit, then you will be taxed on the extra amount.

  • You can NOT take housing allowance if you roll your money over to an IRA or 401(k). You must keep your money in a 403(b). However, if you get a new job, then you can roll the money back into a 403(b) and have housing allowance eligibility.

  • Housing allowance is excludable from gross income for federal and state income tax purposes but not for self-employment tax purposes. When a portion of compensation is received as housing allowance, federal and state taxes are directly reduced. SECA taxes are not directly reduced.

  • Housing allowance is an exclusion from income permitted by Section 107 of the Internal Revenue Code. It is not a deduction. In other words, a housing allowance is money that is not reported as income. A housing allowance is never deducted because it is never reported as income in the first place. However, the minister is required to include any excess housing allowance as income on their Form 1040.

Click here to learn about housing allowance during retirement.


To learn more about housing allowance, download our FREE Housing Allowance eBook.

Envoy does not offer legal or tax advice and encourages that you consult with a lawyer and/or professional tax advisor for personalized tax advice.

How to promote Biblical financial stewardship to your staff

It can be difficult to help your staff become motivated about their future. But when you're able to encourage their saving by helping them understand the concept of their future funded ministry, saving begins to have a purpose and something that they can look forward to.   

Here is some encouragement you can give to your staff as you explain the importance of funding their future ministries: 

Our calling to love and serve others doesn't end at age 65. 

We all have unique passions, abilities, and experiences that God wants to use in ALL seasons and stages of our lives. But these stages of life must be funded. We must save for that time when the paycheck stops but our call to ministry continues—what we call our future funded ministry.  

Let's Redefine Retirement. 

For most people, retirement is seen as a time during which you withdraw or cease from work. However, there is never a time in which we stop having value or influence in the lives of others.  In fact, God has created us to minister to others for a lifetime. "Future Funded Ministry" is a redefining of retirement where we as Christians embrace our lifetime calling to love, serve, and minister to others.  

You need to be prepared. Having passion alone is not enough. 

Free your future from the common financial constraints many today will face and instead prepare for a new season with the flexibility to do whatever God calls you to do. As Joseph prepared Egypt during the seasons of plenty for the time when they would have need, so we also prepare now for our future. 

What could you do in your last season? 

From starting a retreat home for missionaries to using horses to help those with special needs to traveling across the country and serving at RV parks, there are endless dreams people have embraced during their 4th quarter in life. 

Start praying and researching your future plans today. 

Visit Envoy Financial to learn more.

5 Retirement Tips Your Participants Need to Know

5 Retirement Tips Your Participants Need to Know

As a Christian, you are called by God to serve. This calling does not end when you stop receiving a paycheck.  Retirement is not only a reward for past service but a stepping-stone to future ministry. We call this your Future Funded Ministry! When you successfully construct and fund a retirement plan, you are creating a source of money to fund your future ministry activities. What an exciting way to live!

Key Retirement Trends for the New Year

Key Retirement Trends for the New Year

US Citizens are waking up to the fact that retirement lasts a long time. That truth holds many implications. The US Government is waking up to the fact that less than 50% of US adults have savings or have only nominal savings. The Retirement Planning industry is waking up to the fact that most participants in formal retirement plans are financially illiterate.