Worker contributions to the WELS Shepherd Plan may be made on a pre-tax basis or an after-tax basis, or both.
Pre-tax contributions reduce a worker’s taxable income, and defer taxes on the contributions and investment earnings until distributed from the Shepherd Plan.
After-Tax Roth Contributions
After-tax contributions, through the Shepherd Plan’s Roth option, allow workers to receive tax-free distributions from the Shepherd Plan if certain conditions are met.
The maximum amount workers can contribute to the Shepherd Plan is $18,000 in 2015. Additional “catch-up” contributions may be made by workers who have attained age 50 and/or have performed at least 15 years of service to WELS. These limits are established on an annual basis by the IRS.
Workers can also rollover or transfer funds to the Shepherd Plan from other retirement accounts, such as retirement savings accounts from former employers or individual retirement accounts (IRAs).
Sponsoring organizations have the option to contribute to the Shepherd Plan accounts of their workers. Employer contributions may be made in the form of matching contributions, non-elective contributions, or a combination of both.
Through matching contributions, the sponsoring organization makes a contribution to the worker’s Shepherd Plan account defined as a percentage of the amount contributed by the worker, up to a maximum amount. For example, a sponsoring organization could match 50% of a worker’s contribution, up to 4% of that worker’s pay. Note that the worker must make a contribution to the Shepherd Plan in order to receive a matching contribution from the sponsoring organization.
Through non-elective contributions, a sponsoring organization contributes a defined amount to each worker’s Shepherd Plan account, including workers who have not made their own worker contributions. The non-elective contribution can be a flat-dollar amount (e.g. $50 per pay period) or a percentage of pay (e.g. 2% of annual pay).
Please note that contributions made by a sponsoring organization to the Shepherd Plan would be in addition to the contributions due for workers who are participants in the WELS Pension Plan.
Special Considerations for Ministers of the Gospel
Worker contributions by Ministers of the Gospel can be made pre-tax for Federal tax and Social Security tax purposes.
Ministers of the Gospel may receive pre-tax employer contributions or make after-tax contributions to a Housing Equity Account that allows distribution for a down payment on the worker’s primary residence prior to age 59 1/2.