4052 / What special rules apply to tax sheltered annuities for church employees?
A duly ordained, commissioned, or licensed minister of a church or a lay person who is an employee of a church or a convention or association of churches, including a tax-exempt organization controlled by or associated with a convention or association of churches, may be able to increase excludable tax sheltered annuity contributions under the special rules explained below.
For these purposes, a duly ordained, commissioned, or licensed minister who is self-employed or who is employed by an organization other than one described in IRC Section 501(c)(3), but with respect to which the minister shares common religious bonds, is considered a church employee.1 This definition includes chaplains.
A church employee may make an election that may provide a higher IRC Section 415 annual additions limit than discussed in Q 4043. This employee may elect an annual addition limit of as much as $10,000 in any one year. Employer contributions under this election, that is, payments in excess of the otherwise applicable annual addition limit, may not aggregate more than $40,000 over the employee’s lifetime.2