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What are "Roth" contributions to retirement funds?

Authored by: Jerry Rich
Date: July 14, 2023

As with many other retirement plans and individual retirement accounts (IRAs), the FCMM Retirement Plan permits contributions that are classified as Roth-designated contributions. Such contributions may only come from employee salary deferral, not from employer contributions.

As opposed to regular pre-tax contributions, the deferral amount designated as Roth does not reduce reported taxable income but may grow tax-free for eventual non-taxable distribution.

For an individual, the benefit of reducing current taxable income can be weighed against the benefit of future non-taxed draws. (Retirees will often be in a lower tax bracket than during earning years, so the current tax saving may, or may not, be more significant than future tax saving.) The decision of how to contribute through salary deferral is up to the employee.

Roth-designated deferrals are accomplished by the employee requesting Roth salary deferrals on Form 03. Either pre-tax or Roth, or even some of both, can be authorized.

For ministers, an additional factor should be considered…the FCMM automatic designation of housing allowance for 100% of retirement distributions. This feature may make Roth contributions less favorable. (See the article “What Could Be Better Than a Roth?” for more information.)

Contributions to the FCMM Retirement Plan may be made as traditional pre-tax (not part of current taxable W-2 income) or as Roth-designated (taxable in year contributed, as part of current income).