Understand Contribution Types
Before completing your Salary Reduction Agreement with your employer, it’s helpful to understand the different ways contributions can be made to your Servant Solutions Retirement Plan account. Taking a few moments to review your options can help you make the choice that best fits your needs.
Church/Employer Contribution
- Tax-deferred
- Paid and remitted by the church/employer as a fringe benefit (i.e. above and beyond the employee’s salary or regular wages).
- Not reported to the employee as income on the annual Form W-2.
Participant Before-Tax Contribution
(Requires a signed salary reduction agreement on file with the church/employer)
- Tax-deferred
- Paid (via salary reduction) by the participant and remitted by the church/employer based on a salary reduction agreement between the employer and employee.
- The salary reduction agreement, which must be kept on file by the employer, allows the participant to reduce currently taxable income and, therefore, current tax liability.
- Reported on the W-2 Form in Box 12 (Code E), but NOT included in Box 1 as a part of wages. For non-ordained (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.
Participant Roth 403(b) Contribution
(Requires a signed salary reduction agreement on file with the church/employer)
- After-tax
- Paid (via salary reduction) by the participant and remitted by the church/employer based on a salary reduction agreement between the employer and employee.
- The salary reduction agreement, which must be kept on file by the employer, reduces the participant’s net paycheck, but the participant’s entire salary is still fully subject to all applicable tax withholding requirements.
- Reported on the W-2 Form in Box 12 (Code BB), and included in Box 1 as a part of wages. For non-ordained (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.
Participant After-Tax Contribution
- Paid by participant on a personal check, typically. Could also be remitted on a church/employer check if withheld from net pay (after taxes) rather than from gross pay.
Know Your Contribution Limits
Once you understand how each contribution type works, the next step is knowing how much you can set aside each year. The IRS sets annual limits on retirement plan contributions, and those amounts can change from one year to the next. To help you plan with confidence, we’ve outlined the current figures for you.
Review contribution limits to see the latest numbers and make the most of your Servant Solutions Retirement Plan.