The Board of Pensions of the Church of the Nazarene has taken action to temporarily suspend certain rules regarding withdrawals from the Nazarene 403(b) Retirement Savings Plan, according to Kevin P. Gilmore, director of Pensions and Benefits USA. The action will allow participants of the plan who have been adversely affected by COVID-19 to take advantage of certain provisions which were authorized by the CARES Act.
Gilmore said the temporary changes authorized by the Board of Pensions affect four key aspects of the 403(b) Plan. These include:
Distributions of Up to $25K
Participants may receive a distribution of up to $25,000 (without the usual 10% penalty) from money they contributed to their account or earnings on those funds (also known as Source 1 funds).
Temporary Suspension of Loans
Participants who have outstanding loans from their account may suspend payments on the loans until the close of 2020.
Additional Loan Modifications
Participants may receive up to two loans (any outstanding loan would count toward the two) from their account and suspend payments until the close of 2020. The total amount borrowed could not exceed 50% of Source 1 funds (see above) or $50,000, whichever is less.
Suspension of Required Minimum Distributions (RMD)
Persons who would normally be required to take minimum distributions (RMD) from their 403(b) accounts may defer such payments for the remainder of 2020.
What You Need to Know
Persons who desire to take advantage of these provisions may do so only if they are faced with a personal or household COVID-19 diagnosis or “experiencing adverse financial consequences” caused by the pandemic. While the usual 10% penalty on distributions (for those age 59½ or less) is waived, taxes are not, but they may be paid over a three-year period.
“We are aware that many of our ministers have been hurt economically by the pandemic” Gilmore said. “That is why the Board of Pensions has taken steps to make funds more readily available. However, we hope participants will give careful consideration to the impact early withdrawal of funds would have on their retirement.” Gilmore quoted a study by the Retirement Clearinghouse which stated that a hypothetical 30-year-old participant who cashes out a 401(k) or 403(b) savings balance of $5,000 today would forfeit up to $52,000 in earnings which would have accrued by age 65, assuming 7% annual growth.
What to Do
Nazarene 403(b) participants who want to know more about how to take advantage of these provisions should contact Fidelity Investments directly at 866-NAZARENE (866-629-2736).