Retirement Income Accounts for Churches

Churches and certain church organizations may set up a tax-sheltered annuity (TSA) that is structured as a retirement income account. This type of plan is sometimes called a church plan.

A church plan is just another qualified retirement plan--in this case, a defined contribution plan--but it is maintained by a church or a convention or association of churches to provide retirement benefits under a TSA for its employees or beneficiaries. This is different from a TSA annuity contract, maintained by an insurance company, or a TSA custodial account, that has to be maintained by a custodian.

Each employee must have a separate account to which contributions are made. However, any number of retirement income accounts can be mixed in a common fund or with assets of a qualified trust if two requirements are met:

• The asset values of each account must be separately recorded so that it is always possible to determine the interest of each account in the fund.
• The accounts and the fund cannot be used for any other purpose except the exclusive benefit of the employees.

A self-employed minister is treated as his own employer. However, a self-employed minister can still participate in a church plan if he or she is also an employee of the church.