Why should Jewish clergy join a retirement plan designed for clergy instead of a regular plan?
- Eligibility for parsonage in retirement
- Flexibility for larger contributions each year
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 Vanguard
- Open to all Jewish clergy and no membership in a rabbinical association required
- Control your own funds at Vanguard
- Run by a non-profit organization, dedicated to the best interest of plan participants
Who runs the Plan?
The Plan is run by a non-profit corporation, The Rabbis and Cantors Retirement Board, Inc., which is incorporated in the State of Delaware. The corporation is run by a volunteer board of directors.
The Retirement Board was founded by the Alumni Association of the Rabbinical School of Hebrew College and Yeshivat Maharat. The Board Chair is Rabbi Jeff Fox, an alumnus of Yeshivat Chovevei Torah Rabbinical School. Other Board members currently include Jeremy Hockenstein and Rabbis Minna Bromberg, Rachel Barenblat and Van Lanckton.
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 for its participants.
If I participate, where and how will my money be invested?
Each participant opens an individual account at Vanguard which holds all the participant’s contributions. As a participant, you can allocate your funds directly with Vanguard and can invest in most Vanguard mutual funds (index and actively managed). These individual, segregated accounts ensure the protection of your funds. We encourage members to consider Vanguard’s low-cost index funds, particularly the “all- in-one” retirement funds (which allocate investments between asset classes based on years until retirement) or the “core” index funds.
What about costs?
The Plan has been structured at very low cost to its members:
- The Plan is covering its operating costs through donations and not charging any administration fees (although we may charge something modest in the future). 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.
- Vanguard charges 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 can be as low as 0.07% with
Vanguard’s index funds.
If I have an IRA (or another retirement plan) already, can I roll it over into the Plan?
Yes, but be aware that the parsonage benefit in retirement applies only to funds invested in the other retirement plan while engaged in your rabbinate [in the technical language of the IRS, “while exercising your ministry”]. There is no specific definition of this term, although it is a lower standard than qualifying for parsonage. In general it means that your rabbinic education was useful for the job and therefore, for example, would not apply to being a greeter at Walmart. Also, it is up to you to track which contributions are eligible or not (and in practice this is very difficult to do).
Is there any limit to the amount that can be rolled over from an IRA to the Plan?
No, there is not.
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 2012, the limit for contributions made in this fashion is $17,000 for those who will not yet be 50 years old as of December 31, 2012. The limit for those who will be 50 years old or older as of December 31, 2012, is $22,000.
Suppose I want to contribute more than $17,000 (or $22,000, if applicable) to the plan. Can I do that? If so, how?
Yes. 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 is $50,000 (or 100% of your compensation, not
including any parsonage allowance), whichever is lower; this year the figure is $55,500
if you will be 50 years old or older as of December 31, 2012.
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.
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 $50K (or $55,500) 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).
Can I find more information on the web?
Yes. Go to any of these sites for more info:
Does the Pension Benefit Guaranty Corporation (“PBGC”) provide a guarantee that will protect my funds?
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]. The Plan is a defined contribution plan. No insurance is available for such plans, nor is any required. Your fund at Vanguard is your own fund and is as safe as the fund of anyone else invested at Vanguard.
How do I sign up?
Follow the directions on our How To Participate page.
How can I learn more?
Try Pension Extends Coverage to More Rabbis in The Jewish Daily Forward.