Using the Retirement Savings Plan
For Manse Equity Allowances
Are you a seminarian about to start your first call, or a minister serving a church that
provides a manse? If so, consider establishing a manse equity fund through the Retirement
Savings Plan of the Presbyterian Church (U.S.A.), a 403(b)(9) plan administered by Fidelity
Investments. By using this fund to regularly set money aside, you can receive immediate tax
benefits while saving for your future housing needs.
Because ministers who live in manses do not have the opportunity to accrue home equity
(since they do not own their homes), some churches compensate their ministers by
contributing annually to the minister’s Retirement Savings account. You may wish to request
this provision in your terms of call. In the absence of such an agreement, you can begin
saving on your own by making contributions to the Retirement Savings Plan (hereafter, “the
RSP”) through a salary reduction agreement. Once you establish an account, upon
retirement, or, if necessary, upon a change of call, you may take a distribution from the
account and apply the funds towards the purchase of a home.
Consider these advantages and conditions:
• Tax savings. The money you and/or your employer contribute to the account is
made on a pre-tax basis. In other words, you will not pay federal income tax on your
contribution the year the contribution is made. The earnings in your account also are
not taxed until you withdraw the funds.
• Eligible for housing allowance. The Board of Pensions annually designates that up
to 100% of the distributions from the RSP are eligible for exclusion from federal
income tax by ministers as a housing allowance. Any portion of the funds that
qualifies for treatment as housing allowance is not taxed at retirement.
• Portability. If you terminate your employment, become disabled, reach age 59½, or
die, your funds can be transferred to an Individual Retirement Account (IRA) or
another 403(b) account.
• Limits on employee contributions. An employee’s voluntary contributions cannot
exceed specific annual contribution limits. The generally applicable limits are the
lesser of taxable compensation or $15,500. There are also allowances for employees
age 50 and older and those with long service that may permit you to contribute more
than the general limits stated above. More information on contribution limits is
available from Fidelity Investments at 800-343-0860.
• Limits on employer contributions. The IRS limits the amount an employer can
contribute each year to the lesser of 100% of taxable compensation (i.e., salary
exclusive of housing allowance and accountable reimbursements) or $46,000. Note:
The combined employer/employee annual contribution may not exceed $46,000. If
an employee is contributing $15,500, for example, the employer contribution may
not exceed $30,500.
• Funds can be made available for housing needs. Before retirement, you can
withdraw any voluntary contributions that you, the employee, have made if a hardship
exists. (Hardship means an immediate and significant financial need that cannot be
met from any other source.) The rules permit hardship withdrawals for the purchase
of a primary residence. If you are an ordained member, you also may withdraw
employer contributions for the purpose of purchasing a primary residence.
Any funds withdrawn are subject to a mandatory 20% withholding tax and a 10%
penalty tax if they are not eligible for treatment as housing allowance.
• Distribution options. The Plan provides for various forms of distributions upon
retirement, disability, or, if you die, at the request of your designated beneficiaries.
You can leave your money in the account until the later of retirement or age 70½.
When you elect to take a distribution, it can be made in the form of a lump sum, as
partial distributions, or as an annuity.
Want to know more about the Retirement Savings Plan? Check any of these resources:
Visit www.pensions.org, call the Board of Pensions at 800-773-7752 (800-PRESPLAN), or
contact Fidelity Investments at 800-343-0860.