Please call Fidelity at 1-866-NAZARENE (629-2736) to obtain this form.
The Required Minimum Distribution (RMD) is something every retiree should be aware of. It is the smallest amount you must withdraw from your Nazarene 403(b) Retirement Savings Plan every year after a certain age, unless you are still working. If you fail to do so, you may face a significant penalty.
Our 403(b) record keeper, Fidelity Investments, has the latest information on what is involved in determining your RMD at this link. If you need assistance in calculating your RMD, contact Fidelity at 866-629-2736.
You can only do this if you are a district licensed or ordained Nazarene minister over the age of 59½. You may request that Fidelity Investments designate your withdrawal as housing allowance for retirement housing purposes. To do this, contact Fidelity toll-free at 1-866-NAZARENE (629-2736). Fidelity will send a pre-completed form to you to review and sign. If you are married, both you and your spouse will need to sign the form. Please return the completed form to Pensions and Benefits USA, 17001 Prairie Star Pkwy., Lenexa, KS 66220. The Pensions and Benefits USA office will be responsible for approving the request for housing allowance.
Fidelity will issue an IRS Form 1099-R in January of the year following the distribution. They will report any housing allowance designated withdrawal as “taxable amount not determined” in Box 2 of the 1099-R.
The availability of a housing allowance exclusion for denominationally-sponsored pension plans has been a very attractive benefit for many retired ministers. In many instances, retired ministers have been able to exclude all of their 403(b) distribution income by having the Plan designate their distribution request as a housing allowance. Keep in mind that the housing allowance designation is limited to denominationally-sponsored plans, like the Nazarene 403(b) Plan.
The responsibility for determining the portion of the housing designation rests solely with the minister. In retirement, IRS guidelines allow a minister to designate the lesser of (1) the fair rental value of the furnished home plus utilities, or (2) the amount actually used to provide a home. Legitimate housing expenses include rent, mortgage payments, interest, home insurance, taxes, repairs, utilities, furnishings, and general maintenance costs for one’s primary residence. You will want to document all of your expenses.
Until the Clergy Housing Allowance Clarification Act of 2002, it was unclear that ministers needed to include a fair rental value when computing their housing allowance. This Act updated the Code to make sure ministers include a rental value of their property in determining how much they can exclude from income tax. However, the IRS remains silent on how a minister can go about determining the fair rental value. According to the late clergy tax specialist and CPA Dan Busby, “the fair rental value should be based on comparable rental values of other similar residences in the immediate neighborhood or community, comparably furnished. One of the best methods to use in establishing fair rental value of your housing is to request a local realtor to estimate the value in writing. Place the estimate in your tax file and annually adjust the value for inflation and other local real estate valuation factors.”
Carefully review P&B Tax Memo #13 – The Minister’s Housing Allowance. You may also wish to obtain IRS Publication 517 which provides helpful information in this regard. You may also want to review the “Minister’s Tax and Financial Guide,” prepared by the Evangelical Council for Financial Accountability (ECFA), which is made available to all active Nazarene ministers in January of each year.
NOTE: Distributions made from a 403(b) account (whether designated housing allowance or not) do not need to be included in determining your Social Security self-employment tax liability. This is due to the fact that distributions from a 403(b) account are not considered as “earned income,” but as “deferred income.”
On March 15, 2019, the U.S. Seventh Circuit Court of Appeals unanimously upheld the constitutionality of the longstanding clergy housing allowance under section 107(2) of the Internal Revenue Code. In declaring the housing allowance constitutional, the court likened the clergy housing allowance to other similar benefits in the tax code for work-related housing, finding the provision permissible under the First Amendment and well-established legal precedent.
The decision reversed the one made in 2017 by Wisconsin District Court Judge Barbara Crabb, who ruled in favor of the Freedom From Religion Foundation (FFRF). That action threatened the benefit for clergy in states covered by the Seventh Circuit (Illinois, Indiana, and Wisconsin) and, potentially, ministers across the USA. The result would have had a devastating financial impact on congregations and ministers who qualify for the benefit.
As of this writing (11/11/22), the FFRF has not petitioned the U.S. Supreme Court to hear the case.
Section 107 of the Internal Revenue Code provides that, in the case of a minister of the gospel, gross income does not include the rental value of a home furnished to the minister as part of the minister’s compensation, or rental allowance paid to the minister as part of the minister’s compensation to the extent used by the minister to rent or provide a home.
In Rev. Rul. 75 22, 1975 1 C.B. 49, the Internal Revenue Service concluded that the portion of a retired minister’s pension designated as a rental allowance by the national governing body of a religious denomination having complete control over the retirement fund was excludable under Section 107.
The 1982 General Board of the Church of the Nazarene voted that 100 percent of the pension paid to a retired minister be designated as housing allowance to the extent allowed under Section 107 of the Internal Revenue Code.
This designation was intended to be permanent.
Note: this information is provided with the understanding that Pensions and Benefits USA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.
If you are receiving taxable income from a Nazarene Church or Church Agency, or if you are a Nazarene Evangelist or a Chaplain, you are eligible to enroll in the Nazarene 403(b) Retirement Savings Plan.
Once your account has been activated, you can access your account online through Fidelity NetBenefits® at www.fidelity.com/atwork or call the Fidelity Retirement Specialists at 1-866-NAZARENE (629-2736) to speak with a representative or use the automated voice response system, virtually 24 hours, 7 days a week. Fund performance information is also available on our site. Check out the Guide to NetBenefits® Brochure.
See the 403(b) section of our website for more details about the plan.
You are permitted to roll over eligible pretax contributions from another 401(k) plan, 401(a) plan, 403(b) plan or a governmental 457(b) retirement plan account or eligible pretax contributions from conduit individual retirement accounts (IRAs). A conduit IRA is one that contains only money rolled over from an employer sponsored retirement plan that has not been mixed with regular IRA contributions. Call the Fidelity Retirement Specialists at 1-866-NAZARENE (629-2736) or log on to Fidelity NetBenefits® at www.fidelity.com/atwork for details.
See the 403(b) section of our website for more details about the plan.
Withdrawals of voluntary salary reductions are available when you reach age 59½, terminate employment, retire, experience severe financial hardship, become disabled or upon your death (to be paid to your beneficiary).
Withdrawals of Annual Pension Supplement (APS), employer matching, or salary addition contributions are NOT available until after you reach age 62. The only exceptions to the age 62 restriction for these funds are death or disability.
Withdrawals made by retired Nazarene ministers may be designated as “housing allowance” and thereby may qualify as tax-free withdrawals.
See the 403(b) section of our website for more details about the plan.
Although your plan account is intended for the future, you may borrow from your account for any reason. Generally, the Nazarene 403(b) Retirement Savings Plan allows you to borrow up to 50% of your employee salary reduction source balance. The minimum loan amount is $1000, and a loan must not exceed $50,000. You then pay the money back into your account, plus interest, through automatic funds transfer from your bank account. Any outstanding loan balances over the previous 12 months may reduce the amount you have available to borrow. Be sure you understand the Plan guidelines before you initiate a loan from your plan account.
To learn more or to request a loan, log on to www.fidelity.com/atwork or call the Fidelity Retirement Specialists at 1-866-NAZARENE (629-2736).
See the 403(b) section of our website for more details about the plan.
You are always 100% vested in all contributions to the Nazarene 403(b) Retirement Savings Plan no matter what their source.
See the 403(b) section of our website for more details about the plan.
If you have reached age 50 or will reach 50 during the calendar year January 1 – December 31 and are making the maximum plan or IRS pretax contribution, you may make an additional “catch-up” contribution each pay period. The maximum annual catch-up contribution is $6,500. Going forward, catch-up contribution limits will be subject to cost-of-living adjustments (COLAs) in $500 increments. Your employer does not match your catch-up contributions.
See the 403(b) section of our website for more details about the plan.
Fidelity’s planning tools are designed to help you manage your assets as you plan for retirement. Simply log on to Fidelity NetBenefits® at www.fidelity.com/atwork to access these tools.
See the 403(b) section of our website for more details about the plan.
To help you meet your investment goals, the plan offers you a range of options. You can select a mix of investment options that best suits your goals, time horizon and risk tolerance. The 27 investment options available through the plan include conservative, moderately conservative and aggressive funds. A complete description of the Plan’s investment options and their performance, as well as planning tools to help you choose an appropriate mix, are available online at Fidelity NetBenefits®.
The Plan also includes the Fidelity Freedom Funds® that offer a blend of stocks, bonds and short-term investments within a single fund. Each Freedom Fund’s asset allocation is based on the number of years until the fund’s target retirement date. Freedom Funds are designed for investors who want a simple approach to investing for retirement.
See the 403(b) section of our website for more details about the plan.
If you qualify under the plan provisions for the Annual Pensions Supplement (APS) contribution, you will receive that year’s tax-deferred deposit into your account. You will want to contact the Pensions and Benefits office at pensions@nazarene.org for information regarding the eligibility criteria necessary to qualify under plan provisions for APS contributions. In addition, all employers are encouraged to match a portion of the employee’s voluntary salary reduction contributions. These salary additions or matching contributions would be tax-deferred as well.
See the 403(b) section of our website for more details about the plan.
The limit on elective deferrals—the most an employee can contribute to a 403(b) account out of salary—is $20,500 in 2022. However, if you’re 50 or older, you may contribute an additional $6,500 as a “catch-up” contribution, bringing your contribution total to $27,000. The 2022 limit on annual additions (the combination of all employer contributions and employee elective deferrals to all 403(b) accounts) generally is the lesser of $61,000 or 100% of includible compensation for the employee’s most recent year of service.
Learn more about contribution limits to 403(b) accounts by visiting the IRS here .
Your enrollment becomes effective once you elect a deferral percentage, which initiates deduction of your contributions from your pay. These salary deductions will generally begin with your next pay period after we receive your enrollment information , or as soon as administratively possible.
See the 403(b) section of our website for more details about the plan.
Through automatic payroll deduction, you may contribute up to 100% of your eligible pay on a pretax basis, up to the annual IRS dollar limits .
See the 403(b) section of our website for more details about the plan.
To enroll, complete the Contribution Agreement , have your employer sign the form and return a copy to P&B. If you are a self-employed, unincorporated evangelist, return the form to the Pension and Benefits office. Once the form has been completed, you should determine your investment election.
To set up your investment elections contact Fidelity by calling 1-866-NAZARENE (629-2736) or visit www.fidelity.com/atwork . If you do not select your investment options then your contributions will be directed to the age-appropriate Fidelity Freedom Fund as described in the Nazarene 403(b) Retirement Savings Plan Document.
You must also complete the Beneficiary Designation form and return it to Fidelity. If you are married, your spouse must be your beneficiary for 100% of your account balance unless your spouse signs the spousal consent portion of the beneficiary form authorizing an alternate beneficiary. If a Beneficiary Designation is not provided to Fidelity, upon your death, your vested account balances will be distributed according to the provisions of the plan.
Even if you decide not to make a voluntary salary reduction contribution to the plan right now, you should still contact Fidelity toll free at 1-866-NAZARENE (629-2736) or go to www.fidelity.com/atwork to establish how Pensions and Benefit Fund, World Mission, or Agency contributions should be invested in your account in the event you qualify under plan provisions for the Annual Pension Supplement (APS). Check out the Guide to NetBenefits brochure for information on accessing your account online. You should complete the Beneficiary Designation form and return it to Fidelity.
See the 403(b) section of our website for more details about the plan.
There is no waiting period. You can enroll in the Plan at any time.
See the 403(b) section of our website for more details about the plan.
Please call Fidelity at 1-866-NAZARENE (629-2736) to obtain this form.