From the Son of a Baptist Preacher: How Church Plans and Housing Allowance Work in Your Favor as a Pastor

Follow Our Lead on Church Plans for Your Retirement Needs

By Stephen Osborne, Senior Relationship Manager in Retirement Solutions

Ministers and ministries are unique — both in mission and in operations. As a minister, you received an inspirational calling from God and most likely pursued theological training to prepare for your vocation. But did your seminary offer you a class on how housing allowance works? What about church plan administration?

Then, once you began pastoring, you may have found benefits that didn’t quite fit the needs of your church or ministry — such as a 401(k). And it’s almost guaranteed that most providers without a ministry background know little to nothing about helping ministers with housing allowance designations.

At GuideStone®, church plan administration and housing allowance designations are not the exceptions — but rather the rule. In fact, 99% of our clients utilize church plans for their retirement needs. When it comes to your ministry’s retirement plan, we invite you to follow our lead — as hundreds of thousands of pastors have before. 

What is a church retirement plan?

A church plan is a type of employee benefit plan offered by a church or a convention or association of churches for employees working for the church. While these plans are similar to employee benefit plans offered by for-profit considerations, church plans are treated differently under federal law, principally the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (Code).

GuideStone’s Church Retirement Plan is designed specifically for SBC churches and open to anyone who receives W-2 taxable income from a Southern Baptist church, church-related school or association — with no cost to enroll.

How are church retirement plans different than other plans?

Church plans are exempt from the requirements imposed by Title I of ERISA on most other employers, which results in significantly lower or no administrative costs. For example, church plans do not have to comply with the reporting and disclosure requirements required by ERISA, including an annual Form 5500 filing requirement, and are not subject to an annual audit requirement. Even so, GuideStone closely follows IRS rules and regulations by maintaining updated retirement plan documents and encouraging employers to operate their retirement plans “in the spirit of ERISA”.

With little to no administrative costs, church retirement plans save your church or ministry money.

So, what exactly is the minister’s housing allowance?

Section 107 of the Internal Revenue Code allows ministers of the Gospel to exclude some or all of their ministerial income designated as housing allowance from income for federal income tax purposes. While this tax exclusion is available to both actively working and retired ministers, it’s important to know that the housing allowance designation must come from the same source who issues the income.

How do you determine housing allowance?

If a housing allowance is properly designated in advance, a minister can exclude the lowest of the following three amounts from income for federal tax purposes:

  • The total housing allowance designated by their church (or GuideStone for retirees)
  • Actual housing expenses (including mortgage payments, utilities, insurance, improvements, furnishings, etc.)
  • The fair rental value of the home (furnished, plus utilities)

How is housing allowance designated?

  • Both active and retired ministers may receive housing allowance — just from different sources.
  • Housing allowance must be approved and designated for future income.
  • During paid ministry, housing allowance is designated by the church or ministry. In retirement, housing allowance is designated by a denominational pension board such as GuideStone and, in some instances, must be verified first by a previous employer.

For more information about housing allowance qualifications and annual designations, review our Questions and Answers About the Minister’s Housing Allowance or listen to our Minister’s Housing Allowance webinar.

GuideStone is here to help!

GuideStone is eligible to maintain a church plan for organizations associated with the SBC. As you engage in due diligence related to church plan considerations, please know that GuideStone welcomes the opportunity to provide information and resources to your organization and its advisors with respect to this matter.

Learn more about GuideStone’s retirement solutions and services and how you can experience the GuideStone difference.

Stephen Osborne joined GuideStone in 2005 and serves as a Senior Relationship Manager, specializing in church retirement plan design and employee education. He holds a bachelor’s degree in Marketing from Texas A&M University.

Stephen and his wife, Courtney, have been married since 2002 and enjoy raising their boy/girl twins — Andrew and Charis.