IRA rollover from church retirement plan
I have a prospect that has a balance in a previous church retirement plan. We would like to do a direct rollover to an IRA, but was told by the custodian of the church retirement plan that if should rollover those monies to an IRA, and when he retires, because the monies are in a IRA he could lose his opportunity to mark those monies being distributed as an housing allowance, and therefore forgo taxes. Trying to find info on this subject. Please help!
Thank you!
Alek
Permalink Submitted by Alan Spross on Tue, 2008-11-11 01:09
That’s correct. The housing allowance exclusion is lost for any IRA distributions. A partial rollover may be the answer if the 403b or church plan provides that, leaving behind enough to fully utilize the housing exclusion.
Offsetting considerations:
1) Does prospect fully qualify for the housing exclusion based on where eligible work was performed?
2) Is the church plan financially sound? Some of them have opted out of PBGC coverage and are therefore uninsured.
Permalink Submitted by mk foss on Tue, 2008-11-11 01:09
I have a client who is a retired Episcopal priest; that church and some others treat retirement benefits as a tax free housing allowance. I’m not sure if that stance has ever been questioned by IRS.
The tax free status would definitely be lost if transferred to an IRA.