Parsonage In Retirement


A signature project of TEN is a unique "no taxes in, no taxes out" pension. 

All Orthodox day schools give parsonage to their limudei kodesh teachers. An increasing number give parsonage to their female Judaic teachers as well. 

Presently, schools make pre-tax contributions to teachers' retirement plans. However, when the teachers get the funds in retirement, they are taxable.  

Priests, ministers and pulpit rabbis have a much better deal. When they take out distributions from their pensions, they can take the appropriate amount as parsonage, tax free. 

To do so, the pension fund has to be set up as a 403(b)(9) plan, in keeping with IRS Code 414e, as opposed to a 401(k) or a regular 403(b) plan.

With life expectancy increasing rapidly, it is not unusual to live two decades or more as a retiree. The amount of money which a rebbe or a morah will save in taxes by getting parsonage in retirement is huge.

Pension Parsonage FAQ

Can my school or organization's present retirement plan give me parsonage?

 No. The IRS only allows retirement plans whose Plan Documents are set up in accordance with Section 414(e) of the Tax Code to give the tax free housing allowance.  

My school already has a 403b. Can they also participate in the TEN plan?

Yes, an employer can have more than one plan.  

Can a female Limudei Kodesh teacher participate in this pension?


Can I roll over money from a 403b or IRA to the TEN plan and take parsonage from those funds?

Yes, you can roll over funds from a regular 403b to our parsonage-granting 403b9. When you rollover these funds to our plan, we will ask you to confirm that these funds were earned in your role as a mechanech(et). If that is the case, and then you will be able to withdraw funds tax free as a housing allowance. 

How much parsonage can I take in retirement?

The rules are the same as when you are working. Parsonage is the lesser of these two figures; (1) Your actual costs for your home (mortgage or rent, homeowners insurance, utilities, home improvements, appliances, furnishings, decorations, supplies, household goods,  maintenance) , (2) The fair rental value of your furnished home plus utilities.  TEN will give you a parsonage worksheet each year for you to estimate the coming year's expenses.   If you follow the above guidelines, our board will approve your amount.   

Is parsonage (and parsonage in retirement) a legal grey area?

Parsonage in retirement is as "kosher" as parsonage when you are working, as long as the funds are in a "Church Plan" (403b9). Every religious denomination  maintains a Church Plan for its clergy. 

Parsonage has been part of the tax code since income tax was instituted in 1913. "Ministers of the gospel" have been receiving parsonage from "Church Plan" retirement plans since that time. Though there are challenges brought from time to time  from groups opposed to the place of religion in the US (there is presently one in the Federal Courts), the IRS, the courts and Congress have  upheld this exemption. Parsonage enjoys widespread bipartisan legislative and judicial support.