Option 1 - Traditional 401(k) -  Income Deduction Today, Taxed Later

The AFLC offers a 401(k) Retirement Savings Plan through Empower Retirement for all eligible employees. See AFLC Summary Plan Descriptions (SPD) for details concerning participant eligibility. Contributions to a 401(k) plan are made with “pre-tax” dollars, grow tax-deferred during the accumulation phase and are taxed as ordinary income upon distribution in retirement. Because the AFLC Retirement Savings Plan is “denominationally sponsored” some portion of distributions received by Pastors in retirement will qualify for “housing allowance” and not be subject to ordinary income taxation. Pastors in a Retirement Savings Plan sponsored by a single church do not receive this same tax-favored treatment. Please contact your Certified Public Accountant or other tax professional for details regarding “housing allowance” for pastors.

Option 2 - Roth 401(k)  - Taxed Today, Tax-free Withdrawals Later

The AFLC offers a ROTH 401(k) Retirement Savings Plan through Empower Retirement for all eligible employees. See AFLC Summary Plan Descriptions (SPD) for details concerning participant eligibility. Contributions to a ROTH 401(k) plan are made “after-tax” dollars and are limited to elective employee contributions. Employer matching contributions cannot be invested in a ROTH 401(k) account! Contributions into a ROTH 401(k) grow tax-deferred during the accumulation phase and carry no income tax liability if distributions begin after age 59 1/2. Please contact your Certified Public Accountant or other tax professional for details regarding whether such an account is appropriate for your individual situation.

Enrollment - Employee Actions
​Please contact the AFLC Business Office for enrollment documents  763-545-5631.

Enrollment - Employer Actions
The following forms need to be completed by the church treasurer and returned to the business office before any contributions can be processed.

• 401(k) Participation Agreement
• 2025 Census Form
• EFT Authorization Form

If at any time during the year changes need to be made please use the following form:

• Mid-Year Change/Additional Contribution Form

*There is a $3 monthly processing fee per employee for Life and LTD Insurance policies.

**For 401k, the employer is charged a $3 flat processing fee per payroll date, not matter how many participants.

​Term Life and AD&D Insurance
​What happens to those left behind after death? Loss of income, medical costs, and burial expenses can cause additional burden besides the loss of a loved one. Term Life Insurance and Accidental Death and Dismemberment coverage up to $50,000 is offered to all employees working a minimum of 32 hours per week. At age 65, this coverage is reduced to $32,500 and at age 70 coverage is reduced to $25,000. The plan is guaranteed without requirement for medical underwriting. Dependent Life Insurance is also available. This is $5,000 for a spouse, and $2,500 for each eligible dependent child.

​Long Term Disability Income Insurance
​What if your paycheck stopped coming? It's estimated that one in three people will experience a disabling event sometime in their life. Are you prepared for such an event? This benefit is a available to all eligible employees who work at least 32 hours per week. In the event of a disabling event the participant will receive 60% of their “before-tax” earnings to a maximum annual salary of $78,000 after a 90 day elimination period. The employer needs to “gross up” the participant’s salary to include the disability premiums so that premiums are paid with “after tax” dollars.

Both of these plans require 100% participation. All congregations that choose to participate must enroll all eligible employees.

Please contact the AFLC Business Office for enrollment documents 763-545-5631.

*There is a $3 monthly processing fee  per employee enrolled in the Life or LTD policies.

Help In Service Fund (HIS Fund)
The purpose of the HIS Fund is to assist AFLC pastors and their families with financial needs resulting from various unforeseen circumstances. Any money distributed is done so as a gift. Repayment is not expected. However, if a recipient finds himself in a position and has a desire to give to the HIS fund at a later time, they are encouraged to give to the AFLC and designate the gift to the HIS fund.

HIS Fund Application
To apply for a distribution from the HIS Fund for yourself, or on behalf of someone else, please complete the application form and return it to the AFLC Presidents office either by mail or email, [email protected]

HIS APPLICATION

HIS Fund Policy ​as of October 2023

The Association of Free Lutheran Congregations (AFLC), in the exercise of its religious and charitable purposes, has established a benevolence fund, the Help In Service Fund (HIS Fund), to assist AFLC pastors in financial need.

The Pastor and Congregational Care Team was established by the AFLC congregations to assist pastors and congregations. This organization has a unique opportunity to work with AFLC pastors and their families. The AFLC Benefits Board works in conjunction with the PACCT to help with needs. The PACCT may determine needs and suggest a solution. The Benefits Board manages the HIS Fund to assist with the costs of implemented solutions.

The AFLC welcomes contributions to the HIS fund. Donors are free to suggest beneficiaries of the fund or of their contributions to the fund. However, such suggestions shall be deemed advisory rather than mandatory in nature. Donors will not be entitled to a return of their designated contributions on the grounds that the AFLC failed to honor their designations.

Donors wishing to make contributions to the HIS Fund subject to these conditions may be able to deduct their contributions if they itemize their deductions on their federal income tax return. The AFLC cannot guarantee this result and recommends that donors who want assurance that their contributions are deductible seek the advice of a tax attorney or CPA. Checks should be made payable to the AFLC, with a notation that the funds are to be placed in the HIS Fund.

The administration of the fund, including disbursements, is subject to the exclusive control and discretion of the Benefits Board. The Benefits Board may consider suggested designations, but in no event is it bound in any way to honor them, since they are accepted only on the condition that they are merely nonbinding suggestions or recommendations.

HIS Fund distribution requires an application process both to describe the request and to determine the need. All applications are to be submitted to the President’s office. PACCT may also assist with submitting applications on behalf of an individual in certain cases of confidentiality. The application form is utilized for the purpose of accountability. Any monies distributed are done so as a gift. Repayment is not expected.

The board recognizes there are times when privacy is of utmost importance. The Benefits Board will work on behalf of a pastor’s request through PACCT. This request will be viewed as valid and accountable as approved within their team. PACCT has their own Procurement of HIS Funds procedures.  The Benefits Board reviews and votes for acceptance of the recommendation by PACCT. The President’s office will also be included in the recommendations, but personal information may not always be shared.

- The AFLC Benefits Board

• 2025 Census Form
• 2024 Census Form
• EFT Authorization Form
• Mid-Year Change Additional Contribution Form
• AFLC Benefits Information
• 401(k) Participation Agreement Form
• Life/LTD Participation Agreement Form
• LTD Salary Update Form

1. What is the role of the AFLC business office, the Empower Representatives, and the Benefits board when it comes to my retirement planning? * Answer: The Benefits Board role is to provide and oversee benefits for AFLC churches and ministries to utilize for their employees. The AFLC Business Office performs this work on behalf of the Benefits Board by maintaining the plans and performing the routine processes with the churches to move money into the employees’ 401ks as well as maintaining the insurance policies. Empower Retirement houses the 401k and their role is to work with the Business Office in the routine processing as well as offer their services to the participants when it comes to moving money into different accounts, making withdrawals, etc.
2. Does this mean I still need a professional financial advisor and a professional tax consultant to help me understand and maximize my pastoral benefits? * Answer: The long answer is that the AFLC cannot provide financial or legal tax advice to any of the Pastors or churches, even when it comes to benefits. So each participant or church should evaluate their need for professional advice when it comes to taxes, finance, etc. The AFLC Business Office may provide general information to help the churches or participants, but cannot legally give out tax advice.
3. Do all Financial advisors and Tax professionals understand the complexities of Clergy planning and taxes? * Answer: Well many likely have a basic understanding of clergy taxes, there is no way we can guarantee that all financial advisors or tax professionals do. Asking a financial advisor or tax professional if they have experience in clergy tax is a great way to understand their level of knowledge. Many financial advisors are not aware of the housing allowance tax benefit. Be very careful if you are encouraged to do a rollover to an IRA. You cannot take tax free housing distributions from an IRA. There are cases where it still makes sense to do partial rollovers from the plan, but it is vital that the financial professional understands the housing allowance rules and takes the tax implications into account.
4. What does it mean for me, as a pastor, that our AFLC 401K plan has a Housing Allowance clause? * Answer: It means that if the money in your 401k was earned with respect to the services that were considered to be in the exercise of the ministry as a Minister of the Gospel (as outlined in Section 107 of the Internal Revenue Code), that you can disburse money as housing allowance which means no income tax withholding is required. You can disburse money as housing allowance once a pastor has reached retirement. This means a retired pastor can receive a set amount of money from their 401k tax-free as long as it follow the appropriate housing allowance designation rules with the IRS.
5. As a pastor, my goal is to be preaching and sharing the Gospels as long as possible. How does this impact my retirement status, or the ability for me to utilize the 401K plan’s Pastor Housing Expenses? What is considered retired? * Answer: That is up to you and your tax advisor. But you cannot be actively working/contributing to the 401k and be withdrawing as retired. You need a retirement date. If you are paid with a W2, you probably are not able to claim you are retired to the IRS. While you are not able to withdraw housing distributions until you are retired, you can still get the housing allowance tax benefit through your income as you have been throughout your working years. If you are only working part time and need to take withdrawals, you can take taxable withdrawals from the 401k and used your earned income to get the tax benefits of the housing allowance.
6. What do I do once I retire? Or, I am retiring, what are my options? * Answer: You can withdraw money from your 401k either as tax-free housing allowance distribution or taxable distributions. Once you reach the RMD (Required Minimum Distribution) age, you have to take out a minimum amount of your 401k. That amount is calculated and changes based on your age and the amount in your 401k.
7. Should this ‘retirement’ definition deter me from investing in the AFLC 401K plan? * Answer: This question is complex and best answered by a legal tax or financial advisor who is aware of your financial situation and needs for retirement.
8. How does this change if I’m called for part time for interim pastor? * Answer: It is up to the pastor to decide if they are retired or not when doing interim work and they should seek tax professional advice when it comes to determining their retirement status while earning supplemental income.
9. Is the goal of the 401K program to take the whole of the account in one lump sum in retirement or more for a yearly or monthly distribution? Is there any tax concerns to be aware of if a one-time payment is requested? * Answer: The main goal of the 401k is to set-aside money for retirement. It is up to the participant how they want to disburse that money once they are retired. They should certainly take into consideration their financial situation when they retire. Distributions from the 401k upon retirement are taxable unless they were put in as after-tax contributions (Roth) or if they are withdrawn as housing allowance (applicable only to retired pastors). Depending on the financial situation, other tax concerns may arise out of withdrawing as lump sum.