What You Need to Know:

• Traditional “Before-Tax” contributions are made on a salary reduction (tax-deferred) basis, lowering your taxable income today and deferring taxes for a future date. They are reported on the W-2 Form in Box 12 (Code E), but NOT included in Box 1 as a part of wages. For non-credentialed (lay) employees, this amount would, however, be reported and taxed as a part of Social Security Wages and Medicare Wages in Boxes 3 and 5.

• Roth 403(b) “After-Tax” contributions are taxable at the time the contribution is made. You pay taxes “today” but will not pay taxes at the time of withdrawal. They are reported on the W-2 Form in Box 12 (Code BB) and INCLUDED in Box 1 as a part of wages. For non-credentialed (lay) employees, this amount would still be reported and taxed as a part of Social Security Wages and Medicare Wages in Boxes 3 and 5. This requires a new salary reduction agreement to be kept on file with the church/employer.

• Roth contributions can only be made by salary reduction. Any match or basic employer contribution that comes from the Church/Employer must be a “Before-Tax” contribution. Because of this, the Church/Employer portion must be contributed to our traditional “Before-Tax” account. These employer contributions are not reported to the employee on his/her Form W-2.

• The combined amount contributed to all designated Roth 403(b) and traditional “Before-Tax” accounts in any one year for any individual is limited (under IRC Section 402(g)). The limit is $22,500 in 2023, plus an additional $7,500 in catch-up contributions in 2023 if you are age 50 or older at the end of the year. The contribution limits are subject to change annually.

• Servant Solutions will accept rollovers of Roth accounts from other employer-sponsored retirement plans that allow Roth contributions. However, applicable law does not allow Roth IRAs to be rolled over into your Servant Solutions Roth 403(b) account because of the different rules that apply to Roth IRAs.

• A distribution from a Roth 403(b) is tax-free and penalty free, provided the five-year aging requirement has been satisfied and one of the following conditions is met:

  • age 59½,

  • disability,

  • or death.

• The 5-taxable-year period of participation begins on the first day of your taxable year for which you first made designated Roth 403(b) contributions to the plan. It ends when five consecutive taxable years have passed. If you make a direct rollover from a designated Roth 403(b) account under another plan, the 5-taxable-year period for the recipient plan begins on the first day of the taxable year that you made designated Roth 403(b) contributions to the other plan, if earlier.

If an employee wants to participate in the Servant Solutions Roth 403(b) investment option, he/she will need to complete a new salary reduction agreement. This is an employer/employee agreement and does not need to be shared with Servant Solutions.

Roth Checklist

Please complete the below checklist if you have employees interested in making Roth contributions to the Servant Solutions Retirement Plan.

___1.    Review your organization’s Employer Eligibility & Participation Schedule. This document should be maintained by all employers participating in the Servant Solutions Retirement Plan; it details how the retirement plan will be administered at your organization. It is retained for your records (and is not provided to Servant Solutions). Older versions of this form will not include Roth Contributions; therefore, you will need to update your records. You can access the newest version of this form at servantsolutions.org > Forms > Our Forms > Employer Forms.

___2.    Any employees who want to begin submitting Roth contributions via a reduction in their net salary (after tax) should complete a Salary Reduction Agreement. This form is maintained by your organization; Servant Solutions does NOT need a copy of the agreement. You can access the newest version of this form at servantsolutions.org > Forms > Our Forms > Employer Forms.

___3.    Based on the employee’s Salary Reduction Agreement, update your payroll records to withhold the after-tax Roth contributions from the employee’s paycheck. Remit the Roth contributions to Servant Solutions as soon as it is administratively feasible via a paper remittance form or online (servantsolutions.org > Remit Online (found in the upper right-hand corner)). 

___4.    Remind all employees to have a current Designation of Beneficiary form on file with Servant Solutions. There is a new online Designation of Beneficiary form available on the Servant Solutions website. You can access the electronic form here.