403B
I am working with a pastor who plans to retire next year. He has a 403b which we have determined will provide continued access to the housing allotment treatment for distributions. He also has a lump sum benefit that is loosely established (I don’t believe it is structured other than something similar to a bonus and written on one piece of paper as an agreement) of $178k, to be paid to him at retirement. It will be 100% taxed as ordinary income in the year he receives it (currently planned for 2022). The business manager of the church has stated they are willing and open to restructuring the agreement for his benefit.
My question is, is there any way to get these funds into a qualified plan? Our hope would be some type of tax deferred, qualified plan that we could rollover into an IRA at retirement and prep for Roth conversions over the follow few years. At the very least though, is there a way the church can deposit those funds (even if over a few years) into his 403b once he retires.
Complex situation and really appreciate your help.
Permalink Submitted by Alan - IRA critic on Sat, 2021-09-11 03:21
Beyond maxing out his 403b contributions including the age 50 catch up plus the special catchup (if the 403b permits it), I don’t know of another way to do this. If the arrangement can be modified, perhaps payments can begin now and he could use them to subsidize maxing out the 403b for whatever time he remains working. Any increased 403b contributions would offset the taxes due on the payment of the bonus dollars depending on how much is left of his 403b elective deferral limit.