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I heard (not necessarily a reliable source) that the type of underlying investment in the 403(b) affects whether it can be paid out as Ministers housing, naming index funds as ineligible versus managed funds. Is there any such restriction? Thank You.

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Level 15

A pension or retirement account can't be used for retired clergy housing allowance unless the plan is sponsored by the church or denomination. Generally, a church would provide a 403(b), a section 457 deferred compensation plan, or a traditional pension.

If you were to roll the funds over into an IRA in your own name, you lose the ability to treat it as a non-taxable housing allowance. The retirement plan must be sponsored by the church or denomination and the housing designation must be made by the church or denomination.

But what specific investments you have within the fund doesn't matter.

Answer

Level 15

A pension or retirement account can't be used for retired clergy housing allowance unless the plan is sponsored by the church or denomination. Generally, a church would provide a 403(b), a section 457 deferred compensation plan, or a traditional pension.

If you were to roll the funds over into an IRA in your own name, you lose the ability to treat it as a non-taxable housing allowance. The retirement plan must be sponsored by the church or denomination and the housing designation must be made by the church or denomination.

But what specific investments you have within the fund doesn't matter.