Contributions

Your Contribution

You may contribute your own money to the plan but are not required to do so. (If you do not contribute, you may miss out on your employer’s matching contribution. See below for more details.) Here are the ways that you can contribute:

Pre-tax

• Contributions are deducted from your pay on a pre-tax basis, lowering your current taxable income.
• Potential earnings on your invested savings grow on a tax-deferred basis.
• You pay federal income tax (and, if applicable, state income tax) on your contributions and any earnings when you take distributions from your plan at retirement.
• The taxable portion of your account is subject to 20% mandatory federal income tax withholding unless it is directly rolled over to an IRA or another retirement plan.

Roth (available as of January 12, 2024)

• Contributions are deducted from your pay on an after-tax basis.
• Potential earnings on your invested savings grow on a non-taxable basis (as explained below).
• If certain conditions are met when a withdrawal is taken—that is, if you take a qualified distribution—the earnings on your invested savings are not subject to federal income tax.
  • A qualified distribution is one that is taken (1) at least five tax years after your first Roth contribution to the plan and (2) after you have attained age 59 1/2, or if you become disabled or die.
• Since your contribution was made on an after-tax basis, the contribution itself is also not subject to federal income tax upon withdrawal.

After-tax

• Contributions are deducted from your pay on an after-tax basis.
• Potential earnings on your invested savings grow on a tax-deferred basis.
• You pay federal income tax (and, if applicable, state income tax) on any earnings when you take a distribution from the plan.
• Since your contribution was made on an after-tax basis, the contribution itself is not subject to federal income tax upon withdrawal.

Employer Contributions

• Employers that are subject to the authority of The Episcopal Church must contribute a base contribution equal to at least 5% of an eligible lay employee's compensation and a matching contribution (generally equal to 4%). An employer’s base and matching contributions should equal at least 9%.¹
• Employers may choose to make a larger base contribution, as long as the combination of the base and the match equals at least 9%.

Employer Match

• If you are an eligible lay employee, your employer may match your contribution (as described above).
• The employer match is essentially free money for your retirement account, so you should consider contributing at least enough to receive your employer’s full match. The total annual amount that you and your employer may contribute to the plan across pre-tax, Roth, and after-tax contribution sources may not exceed IRS contribution limits.

Increasing your contribution rate by as little as 1% may increase your retirement security. Remember: Your employer matches your contribution dollar for dollar, typically up to 4% of your compensation.

Eligible Compensation

Compensation is used to determine Total Assessable Compensation, which is the basis for determining the amount paid by employers in assessments in defined benefit pension plans and/or the compensation used to calculate employer and employee contributions to a defined contribution plan.

Compensation* includes:

• Base salary (excluding housing) and scheduled taxable cash payments
• Cash housing allowance and/or utilities
• Employer provided housing
• Employer contributions to a qualified or non-qualified plan: Includes employer contributions to a qualified defined contribution plan, such as a 403(b) or 401(k), and/or to a non-qualified deferred compensation plan or arrangement (whether funded or not). Does not include assessments paid to CPF. (May have been previously known as a Housing Equity Allowance.)
• One time payments: includes one-time cash payments, such as bonuses or overtime, that are taxable. Also includes one-time cash payments that are excludible from an employee’s gross income for income tax purposes under the U.S. tax code or a similar law of a local jurisdiction. (For example, the portion of a cleric’s bonus that has been designated as a housing allowance.)

* Corrections to compensation and/or employment records will only be accepted for two years immediately preceding the current calendar year unless interest is paid on any assessment that becomes payable to The Church Pension Fund as a result of a correction. Any form of severance (including pay continuation following a termination of employment) should be excluded in all cases.

How Compensation Is Calculated

For Employer Contributions to the Lay DC Plan

Compensation used to calculate employer contributions to the defined contribution plans is the sum of the following four components:

• Base salary (excluding housing) and scheduled taxable cash payments
• Cash housing allowance and/or utilities
• Employer-provided housing
• One-time payments

For Employee Contributions to the Lay DC Plan

Compensation used to calculate employee contributions to the defined contribution plans is the sum of the following (note that these definitions are different than the definitions provided above):

• Base salary (excluding housing)
  • Note that the definition of compensation for a defined benefit plan versus a defined contribution plan is different, and the definition for purposes of calculating employer versus employee contributions to a defined contribution plan is different too.
• Other taxable cash payments (excluding utilities)

 

IRS Contribution Limits

The IRS limits the amount an employee can contribute to their account on an annual basis, as well as the total amount an employer and employee together can contribute. Please see the RSVP & Lay DC Plan Employee Guide for the contribution limits.

¹ This combination is consistent with the requirements of General Convention Resolution 2009-A138.

 

Pensions Disclaimer