FAQ on 403(b) Plan
- Click titles below to expand
What type of plan is the Reform Pension Board’s retirement plan?
The Reform Pension Plan is a defined contribution plan organized within the framework of IRS 403(b) regulations. The Reform Pension Plan is recognized by the IRS as a “church plan,” as the RPB provides benefits to employees of religious institutions.
A defined contribution plan is a retirement plan in which the employer and/or the participant contribute a percentage of salary (including parsonage) or flat dollar amount to the participant’s account. The funds are invested, and retirement benefits are based upon a participant’s pension account balance at retirement.
A 403(b) plan is a retirement plan for employees of public schools and employees of other tax-exempt organizations, including religious organizations.
A church plan is a plan established and maintained by a church or a convention or association of churches that is exempt from tax under Code section 501(a).
It is the employer’s and participant’s responsibility to make regular annual contributions, which will enable the participant’s account balance to grow over time. All contributions are made on a pre-tax basis, reducing current taxation. Income tax on contributions and earnings is deferred until the participant takes a direct distribution.
Is there a maximum contribution limit on the amount that I can contribute to my
The IRS places limits on the contributions that can be made to 403(b) plans. The contribution limits are determined by whether the contribution being made is an “employer contribution” or an “elective salary deferral.” IRS maximum contribution limits apply to all qualified retirement money in addition to the 403(b) plan.
When can I retire and start drawing on my Reform Pension Plan account balance?
You can retire and start drawing benefits from your pension account without employment restrictions after you reach the age of 59 ½. You must be at least 55 years of age to begin drawing benefits if you no longer work for an RPB-defined eligible employer. If you are under 55 years of age, you can withdraw your pension funds after a one-year period in which you are no longer working for an eligible employer as defined by the RPB pension plan. IRS penalties may be incurred for direct withdrawals under age 59 ½.
For my other retirement accounts, I am provided with daily updates on my balances. Why does the RPB provide updates on only a monthly basis?
The Reform Pension Plan is a monthly valued pension plan, not an individual investor account managed by a single investment manager. A monthly valued pension plan is a very different investment vehicle. In fact, for a monthly valued program, the RPB is actually providing performance data much more quickly than many other similar plans.
The Reform Pension Plan funds are invested under the direction of many investment managers with diverse mandates. We cannot release any performance data until our managers, our custodian and our record keeper data are all reconciled. Finally, the RPB accounting department reviews all of the data before the account information is released. The complexity of reconciling data from all of these sources and insuring their accuracy takes time to complete.
What is the RPB’s investment philosophy?
The Reform Pension Board’s investment philosophy is based on two principles: a long-term investment outlook and a diversified portfolio:
The Reform Pension Board’s fundamental viewpoint is that investment decisions should be made based on expected long-term performance. Statistics indicate that changing an investment strategy based on short-term market volatility has historically been an ineffective, and at times counterproductive, approach. The Reform Pension Board remains constant in adhering to a disciplined long-term investment strategy.
The Reform Pension Board maintains a highly diversified investment portfolio to mitigate our exposure to any particular company or investment class. This approach helps diminish the effect of a single market event on the entire portfolio.
I am planning to retire in less than a year. What steps do I need to take with the RPB in order to start receiving monthly distributions from my pension account?
Approximately two months before you plan to retire, you should send a written communication to the RPB office informing us of the date that you are planning to retire and the retirement option that you wish to select. You may contact us in writing by email, fax or postal mail. When your written communication is received and approved by the RPB office, we will send you the relevant retirement forms and information to facilitate your upcoming distributions. After you return the completed forms to the RPB office, we will set up your distributions for retirement.
What are my plan distribution options in retirement?
The Reform Pension Plan offers several options for receiving distributions in retirement. These options include:
- Draw from their account monthly under the Flexible Payment Option.
- Roll over all or part of their account balance to another qualified retirement account.
- Take a direct distribution of all or part of their account balance.
- Purchase an annuity.
Click here for additional information on distribution options located in the Programs & Services section of our website.
How often can I change the amount that I draw monthly from my RPB account in retirement through the Flexible Payment Option?
You can change your monthly benefit distribution up to four times during each year of your retirement. You should note that the maximum amount you can withdraw annually is based on 15% of your pension account balance as of the close of the prior plan year. Please contact the Participant Account Manager at the RPB office in writing to request an adjustment to your monthly distribution amount. Requests generally need to be received by the RPB office by the middle of the month to be effective as of the 1st of the following month.
How can a Plan participant who is going through a divorce divide the account balance between him/herself and the soon-to-be ex-spouse?
In the case of divorce, the RPB requires a Qualified Domestic Relations Order (QDRO) to divide the participant’s RPB account between the participant and his/her spouse. Before a QDRO is processed through the courts, it should be forwarded to the RPB office for review to ensure that it satisfies the RPB’s legal requirements. The RPB provides a model QDRO as a resource that can be accessed Model QDRO.
Once a QDRO is filed and approved by the courts, the RPB will transfer the appropriate amount from the original participant’s account to an account set up for the ex-spouse. The ex-spouse cannot contribute additional funds to the account, but can leave it invested with the RPB or roll the money out of the account.
What happens to my account balance upon my death?
Plan participants are required to designate beneficiaries upon joining the plan. If you are married, your spouse must always be your primary beneficiary unless he/she signs off otherwise to acknowledge a different beneficiary.
In case of death, if your spouse is your primary beneficiary, he or she would take over the account in his/her name and have the same rights to the account as you, including assigning beneficiaries. Your spouse would not be able to contribute to the Plan or claim parsonage.
If you have listed someone other than your spouse as your primary beneficiary, such as your children, they have two options:
- They can roll over the pension money to an inherited IRA account
- They can leave the money with the RPB and take distributions (which are taxable income) over no more than a five year period.
Click here for additional information on beneficiary designation, located in the Programs & Services/ 403(b) section of our website.
Following my death, can my widow continue to utilize the tax benefits of parsonage?
The parsonage allowance is only available to the clergy member, not to their surviving spouse.
Does the RPB allow participants to take hardship withdrawals?
The RPB allows participants who qualify to take hardship withdrawals from the Plan in accordance with IRS regulations. If you are considering requesting a hardship withdrawal, please read the “RPB Hardship Withdrawal Requirement Rules” and our “Q&A for Hardship Withdrawals” to learn the criteria necessary to qualify. We understand that you may be in a difficult situation, and we will be as helpful to you as possible. Contact Ingrid Aponte at email@example.com if you need to obtain a hardship withdrawal request package or have questions about hardship withdrawals.
Does the RPB allow participants to borrow against their accounts?
No, the Reform Pension Plan does not offer any provisions for loans.
How does the Reform Pension Plan address parsonage declarations?
When retirees draw on their pension accounts in retirement, they are receiving distributions of pre-tax contributions and associated earnings. Clergy can use their parsonage exemption to offset some or all of their taxable distributions depending on their housing expenses. The amount of parsonage they claim against their RPB distributions cannot exceed their income from the RPB. Retired clergy should check with a financial advisor to ensure compliance with the IRS parsonage rules. For specific information on retired ministers’ parsonage benefits from the IRS website, click here: Retired Ministers. For additional information on parsonage, including information from the “Minister’s Guide for Income Tax,” please contact the Financial Department of the Central Conference of the American Rabbis (CCAR).
How do I submit for my parsonage exemption each year through the RPB?
The RPB sends parsonage exemption forms to retired clergy each fall in advance of the upcoming year. The participant must confirm or lower the amount of parsonage that they declared for the past year and project the amount of parsonage that they wish to set for the upcoming year. The RPB transmits the collected information to the applicable financial institution, who then issues a Form 1099-R to the participant to reclassify the income from taxable to non-taxable.
Can I roll over money from my other tax-deferred accounts, such as IRAs or 401(k) accounts, to my RPB 403(b) account?
Yes, RPB participants can roll over money from other qualified retirement accounts such as traditional IRAs, 401(k) and 403(b) accounts into their RPB 403(b) accounts. Funds rolled into the plan are tracked separately in our systems and on account statements. Please contact the office to request the appropriate rollover form. We also provide letters of acceptance to facilitate the transactions as needed. Please note that Roth IRAs are not eligible to be rolled over to the RPB 403(b) plan.
Is money that is rolled over from other tax-deferred accounts such as 403(b)s or IRAs to the RPB qualify for parsonage in retirement?
Rollover contributions and associated earnings will be coming from sources that did not directly give the funds to the RPB, and therefore, the RPB does not have the authority to approve parsonage resolutions from distributions coming from rollover funds even if coming from another “church plan.”