Q. A church would like to start contributing to a retirement account for a pastor since they currently don’t pay the pastor. They want to contribute $100 per month. The pastor currently works for nothing for this small church and did not want to take the $100 as salary; hence the church contribution. This is set up as discretionary employer contributions right now. Is that considered to be a special contribution?
A. Contributions to the plan would have to be based on Internal Revenue Code Section 415; therefore, the maximum contribution is limited to the lesser of 100% of compensation, not to exceed $56,000 (2019). If the pastor has no compensation, then there could not be an employer contribution made to the plan. If the plan contained the $10,000 rule (maximum annual contribution; $40,000 maximum lifetime contribution), then 415 has a special rule that permits the church to contribute into a 403(b) plan up to the $10,000 per year even if they have no compensation. This provision was added to the law specifically for ministers who only get a housing allowance but no salary. You would need to see if your 403(b) plan document has that provision.