We have a pastor with a 403(b) he was wanting to rollover to us. We spoke with the other company and they were telling him that he had a parsonage housing allowance. He owns his own home so we were wondering what benefit, if any, would this be to him? He also mentioned he has a pension through his church with another company. Could that be considered a housing allowance?
You need to review Revenue Ruling 75-22. I believe the 403(b) must stay with the denomination. Otherwise you lose the ability for the parsonage exemption. But if taken from the denominations 403(b), I believe withdrawals are tax-free. However, it is a least-of-these equation that has three options (cost-of-living, actual costs, and one other option I can’t remember). I have a had two clients that have done this. One was with Guidestone. They have a fairly decent FAQ that I would recommend reviewing.https://www.guidestoneretirement.org/FormsandFAQs/FAQs/Housing-Allowance
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Permalink Submitted by Alan - IRA critic on Fri, 2017-07-07 17:52
The housing allowance is not related to retirement plans, and is income tax free up to the amount of the allowance or the actual costs of maintaining the home, if less.