AG Financial Solutions

When Congress passed the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) in 2001, they allowed for Roth 403(b) and 401(k) contributions beginning in 2006. Such contributions are taxed before they go into the plan but earnings and qualified distributions are tax-sheltered.

A Roth 403(b) contribution must be made through a salary deferral on an employer check. The employer must allow such deferrals. Please talk to your payroll staff to see if your employer can and will accommodate the Roth 403(b).

If you are an evangelist or chaplain, you may make qualified Roth 403(b) contributions on your own personal check. You must indicate your evangelist or chaplain status on the contribution form that should accompany the check.

A Roth 403(b) is similar to a Roth IRA in the following ways:

• Your compensation used to fund a Roth is taxed before being contributed to a Roth account.
• Earnings grow tax-free.
• Qualified distributions are made tax-free and penalty-free.
• A qualified distribution is one where the Roth account has been open for at least five years and meets other qualifications.

A Roth 403(b) is similar to a traditional 403(b) deferral contribution in virtually all other aspects. It is important to note that items that qualify for a tax-free, penalty-free distribution differ among Roth 403(b)s and Roth IRAs.

Non-credentialed employees will still pay Social Security and Medicare (FICA) taxes on the amount that is contributed to a Roth account just as they do now with the traditional pre-tax 403(b) deferral.

Credentialed ministers should consult their own advisors to determine the taxability for SECA purposes on both the Roth and traditional pre-tax contributions.

2009 contributions to a Roth 403(b) are limited to the lesser of the following:

• $16,500 when combined with traditional pre-tax deferral contributions to a 403(b) and 401(k) plan.
• Includible compensation.
• Certain other limits ($49,000 in 2009) when combined with all other 403(b) contributions.

Special note: Select Plan participants that are at least age 50 can contribute an additional $5,000 in combination of Roth 403(b) and traditional 403(b) deferrals.

Select Plan members may qualify for alternative limits. Contact Customer Care at 1.800.622.7526 or e-mail us at to see if you qualify.

You may elect to have your future contributions made as pre-tax contributions to the Select Plan. Any contributions that have already been designated as Roth contributions cannot be changed to pre-tax contributions.

Employers cannot make contributions designated for a Roth account. However, an employer may contribute matching contributions based on your Roth contributions in the same manner as they can make matching contributions based on your pre-tax deferrals. Talk to your employer to see if they match pre-tax or Roth after-tax contributions.

You should carefully consider which account would be most advantageous to you based on consultation with your own advisor. Some items to consider include, but are not limited to: *Tax bracket in retirement compared to current tax bracket.

• Number of years until retirement.
• Possibility of higher or lower tax rates in the future.
• Desire for tax-free income in retirement.
• Tax deferral now in a traditional 403(b) pre-tax account vs. tax-free income in retirement from a Roth 403(b) account.
• Availability of IRC Section 107 housing allowance for credentialed ministers on distributions from the traditional 403(b) deferrals account.
• The effect that a Roth or traditional 403(b) deferral has on Social Security and Medicare taxes.

You may contribute to both a Roth and traditional 403(b) pre-tax account in the same year. Please note: The combined contribution may not exceed the limits noted above.

The Select Plan can accept rollovers from another Roth 403(b) account or a Roth 401(k) account. The Select Plan cannot accept rollovers from Roth IRAs.

Distributions that are free from tax and penalties can be made when the Roth account has been opened for five years and one of the following events happen:

• You reach age 59 ½
• You are disabled
• Your beneficiaries make withdrawals at your death

You may have a distribution (and in some cases are required to take a distribution) when you no longer have credentials with the Assemblies of God and/or when you severe employment from an Assemblies of God employer. These distributions are taxable and are subject to penalty.

It is important to note that the allowances for distribution of Roth 403(b) accounts, including distributions of principal, do not include all of the allowances for Roth IRA distributions.

You may delay receiving distributions until April 1 following the later of the year you turn age 70 ½ or the year you retire.