1. Why should Jewish clergy join a retirement plan designed for clergy instead of a regular plan?
– Eligibility for parsonage in retirement
– Flexibility to designate larger yearly contributions than with a Traditional IRA
2. Why should Jewish clergy join the Rabbis and Cantors Retirement Plan [“the Plan”] instead of another clergy plan?
– Access low-cost index funds available through Fidelity
– No membership in a rabbinical or cantorial association required
– Control your own investment funds
– Run by a non-profit organization, dedicated to the best interest of plan participants
3. Who runs the Plan?
The Plan is run by a non-profit corporation, The Rabbis and Cantors Retirement Board, Inc. The corporation is run by a volunteer board of directors, as detailed in About the Plan.
4. Legally, what is the Plan?
The Plan is a 403(b)(9) plan (a “church plan” in IRS language). The Plan rules allow Jewish clergy from all denominations to participate. As a church plan, the Plan has benefits over regular 403(b) plans, including being able to designate distributions in retirement as parsonage (housing allowance) for its participants in accordance with IRS regulations.
5. If I participate, where and how will my money be invested?
Please note that RCRP cannot give tax or investment advice. Each participant opens an individual account at Fidelity (and/or Vanguard) which holds all the participant’s contributions.
There is no “RCRP investment” determined by the Plan. As a participant, you can allocate your funds directly with Fidelity and can invest in most Fidelity mutual funds. You can hold multiple funds at Fidelity. You can also invest funds at Vanguard in the Vanguard FTSE Social Index Fund.
6. What types of investments are available through Fidelity (our preferred provider)?
Investments include stocks, bonds, domestic, and international funds. They include index funds (until June 2016 called Spartan funds), actively managed funds, and target-date funds based on an anticipated date of retirement. Each participant makes his/her own decisions about investments.
7.Is there a socially responsible investment (SRI) option?
Yes. Vanguard offers the Vanguard FTSE Social Index fund, an SRI option. (Fidelity does not have any SRI funds at this time). Other than this one Vanguard fund, we are in the process of moving all participant accounts to Fidelity in 2017.
8. Can I invest in both Fidelity and Vanguard, or must I choose one?
You can invest in either or both. Investments at Vanguard are limited to the Vanguard FTSE Social Index Fund.
9. Does RCRP have a preference between Fidelity and Vanguard?
Yes. At this point we are working primarily with Fidelity, because of their experience in working with “church plans.” Investing in Vanguard remains an option for those who want a socially responsible investment fund (SRI). All other funds should be invested in Fidelity.
10. What are the costs to participate?
The Plan covers its low operating costs primarily through participant fees as well as donations, especially from supporting organizations (see below). The Plan charges a modest administration fee to each participant scaled to the amount invested, as follows (for 2017):
A. $18 for accounts less than $10,000
B. $50 for accounts between $10K and $49,999
C. $100 for accounts between $50K and $99,999
D. $150 for accounts between $100K and $249,999
E. $250 for accounts $250K or over
For participants who are members of rabbinical or cantorial associations that are making annual contributions (as of 2017, members of the AJRCA Clergy and Alumni Association, Alumni Association of the Rabbinical School of Hebrew College, OHALAH, the Reconstructionist Rabbinical Association, and the alumni of Yeshivat Chovevei Torah), the fees are reduced. For members of these organizations, participation is in the Plan is free for balances of $50K and under. Above $50K, the applicable fee is reduced by half.
At other plans, annual fees range from 0.20% to 0.35% of assets; that is between $200 and $350 a year per $100,000 of assets.
Fidelity charges a $10 annual fee per participant. (For those who have accounts with Vanguard, they charge a $15 annual fee per fund you are invested in – although this fee is waived for anyone with assets over $50,000 at Vanguard.)
The only other fees are the underlying funds fees, which apply to all investors, and which can be as low as 0.05% with Fidelity’s index funds.
11. If I have an IRA (or another retirement plan) already, can I transfer it (“roll it over”) into the Plan?
Yes, but be aware that the parsonage benefit in retirement applies only to funds earned in the other retirement plan while engaged in your rabbinate or cantorate. (See the question on “exercise of ministry” below.)
- Participants who want to transfer funds from an existing IRA or 403 (b) to the RCRP need to fill out an RCRP form certifying that these funds were earned in the course of professional work as a rabbi or cantor. The form is available here.
- Participants will also need to fill out a transfer form from the mutual fund receiving the transferred funds (Fidelity or Vanguard). See forms page.
12. Is there any limit to the amount that can be transferred (“rolled over”) from an IRA or 403 (b) fund to the Plan?
No, there is not. However, rules regarding transfers are more complex since 2015 due to a court decision affecting the IRS regulations. We recommend consulting a tax professional for advice.
In general, we are aware of these points.
- The term “rollover,” often used for any kind of transfer between one retirement account and another, now has a specific meaning for the Internal Revenue Service. Not all retirement fund transfers are rollovers.
- Each taxpayer is limited to one rollover per 12-month period (an individual 12 months, not a calendar year.) There are significant financial penalties for violating this rule.
- The number of transfers that are NOT rollovers is not limited by the IRS.
- Transfers directly from one mutual fund to another mutual fund (“trustee to trustee”) are not considered a “rollover,” unlike funds made personally payable to an individual.
- Our best understanding is that transfers within RCRP funds (for example from an RCRP Vanguard account to an RCRP Fidelity account) if made directly from one mutual fund to another mutual fund (“trustee to trustee”) are not considered rollovers.
- Here are links to recent IRS policies on rollovers/transfers:
DEFINING “EXERCISE OF MINISTRY”
13.What clergy compensation qualifies as “exercise of ministry?”
According to the IRS, “exercise of ministry” for rabbis and cantors includes the following:
- Performing sacerdotal functions
- Conducting religious worship
- Controlling, conducting, and maintaining religious organizations
- Performing services at a church-related hospital or health and welfare institution, or a private nonprofit hospital
- Writing religious books or articles
Please refer to IRS Publication 517 for further information.
CONTRIBUTIONS AND LIMITS
14. What is the upper limit of the amount that my employer can withhold from my compensation and contribute instead on my behalf to the pension plan?
In 2016, the limit (set by the IRS) for contributions made in this fashion is $18,000 for those who will not yet be 50 years old as of December 31, 2016. The limit for those who will be 50 years old or older as of December 31, 2016, is $24,000
15. Suppose I want to contribute more than $18,000 (or $24,000, if applicable) to the plan. Can I do that? If so, how?
In addition to contributions withheld from your pay, your employer (or, if you don’t work for a synagogue, yourself) can contribute additional amounts to the plan. The total annual contribution limit to the Plan (set by the IRS) in 2016 is $53,000 (or 100% of your compensation, not including any parsonage allowance), whichever is lower. In 2016 the figure is $59,000 if you will be 50 years old or older as of December 31, 2016.
16. Suppose I am contributing to another retirement plan at the same time. How would that affect the foregoing figures?
The total contribution limits set forth above are for funds contributed to all qualified plans (not just this Plan). If you are contributing (or your employer is contributing) to another plan, you can still join the Plan but the total global contributions cannot exceed the relevant number above.
17. Can I make contributions to the Plan directly?
It depends on where you work:
a. If you work for a synagogue, the synagogue has to “adopt” the Plan (we have a simple online form for that) and only the synagogue can send in the contributions (both employee ones and employer ones).
b. If you don’t work for a synagogue (technically, if you don’t work for a church 501c3 organization), then you can join the Plan directly (and the employer does not have to sign the adoption agreement). This means you can send in contributions on your own up to the $53K (or $59,000) limit.
c. If you work for a 501c3 (but not a church 501c3), you have a choice: you can ask your employer to join, or you can contribute directly.
d. If you work for a for-profit entity (for example, as a chaplain for a for-profit hospital), you have to contribute directly, because a for-profit cannot adopt a 403(b) plan).
18. I serve as a chaplain, though I am not an ordained or invested rabbi or cantor. Am I eligible to participate?
Not at this time. Under the rules established by the IRS and affirmed by decisions of the Federal courts, only duly those ordained as rabbis and cantors are eligible be considered as “ministers of the Gospel” for purposes of the tax code, and eligible to receive a housing allowance /parsonage designation.
19. I am ordained as a Maharat and have not chosen the title “Rabbi.” Can I still participate?
The RCRP board has determined that a Maharat is the equivalent of a rabbi or cantor for purposes of participation in the Fund. See list of eligible ordinations/graduations.
20. I am a participant approaching retirement age. Is there anything that I should know?
Contact our office well in advance. Requests for designating parsonage/housing allowance must be made in advance, normally by November 1 in the prior year. Because of differing reporting policies, any withdrawals that are to include parsonage (housing allowance) should come from Fidelity. Please complete this form to request your distributions be designated as parsonage.
ARE FUNDS GUARANTEED?
21. Does the Pension Benefit Guaranty Corporation (“PBGC”) provide a guarantee that will protect my funds?
No. The PBGC provides protection only for pensions that are offered by employers as defined benefit pensions [e.g., 2% of salary for each year of employment will be paid in a pension upon retirement]. This Plan is a defined contribution plan. No insurance is available for such plans, nor is any required. Your fund at Fidelity and/or Vanguard is your own fund and is as safe (or at risk) as the fund of anyone else invested at those major mutual fund companies.
LEARNING MORE AND PARTICIPATING
22. Has the press written about the Plan?
See “Pension Extends Coverage to More Rabbis” in The Jewish Daily Forward.
23. How do I sign up?
Follow the directions on our How to Participate page.
24. When was this web site updated?
Major revisions were made on May 26, 2016 (Lag B’Omer 5776). Minor edits are made periodically.