Clergy Compensation Presentation.pptx [Read-Only] · 2017-11-07 · The compensation for whodoes it...
Transcript of Clergy Compensation Presentation.pptx [Read-Only] · 2017-11-07 · The compensation for whodoes it...
Pensions and Benefits USAChurch of the Nazarene
Clergy CompensationAn Overview
Know the Basics
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Pensions and Benefits USAChurch of the Nazarene
The Three “P”s of Local Church Expenses
Personnel
Property
Program Note: Allocating the cost of having a Pastoral Ministry may include some expenses in each of these categories.
Pensions and Benefits USAChurch of the Nazarene
Some Ground Rules• The cost of having a pastoral ministry includes two parts:
1. The cost of what is done: Program costs (and maybe Property costs)
2. The compensation for who does it (Memo #4): Personnel costs
• Ministers have a unique tax status (Memo #12 and Busby’s Tax Guides).– First: Determine IRS “minister” status
– Income Tax: Employee (Form W2)
– Social Security Tax: Pays as if self‐employed (SECA)
• The local church employermust remain engaged in the process.
Pensions and Benefits USAChurch of the Nazarene
It Matters How “Pastoral Ministry” Expense is Paid!
Third: Partially Tax-Favored Benefits
Finally: SalaryFinally: Salary First: Expense Reimbursements
Second: Tax-Favored Benefits
Pensions and Benefits USAChurch of the Nazarene
1. Expense ReimbursementsLocal Church Program Expense
• Set up an Accountable Expense Reimbursement Plan (Memo #11)
• The Five “W”s of accountability:– What, Why, When, Where, Who
• Avoid:– Receiving any budgeted “balance” at yearend– “Reclassifying” funds after payment
Pensions and Benefits USAChurch of the Nazarene
2. Fully Tax-Favored BenefitsThe First Level of Compensation
• Why? Dollars are free of both SECA and Income Tax liability.
• What Benefits?– “Health and Welfare” benefits (e.g., insurance)– Caution: New rules regarding “health benefits” per ACA– 403(b) Plan contributions (clergy only for SECA)– Some “cafeteria” benefits (e.g., dependent care)– Caution: Use the services of a qualified benefits provider or legal
counsel when setting up local church-sponsored benefit plans.
Pensions and Benefits USAChurch of the Nazarene
Nazarene Senior Pastor AnalyticsTowers Watson Study Results
Pensions and Benefits USAChurch of the Nazarene
3. Partially Tax-Favored BenefitsThe Second Level of Compensation
• Housing and/or Housing Allowance– Memos #1 and #13
• Three tests for exclusion:– Designated in advance– Spent on qualifying expenses– Does not exceed Fair Market Rental Value
• Subject to SECA taxation• Certain expenses paid with housing allowance may also be
deductible.
Pensions and Benefits USAChurch of the Nazarene
4. Fully Taxable RemunerationFinal Level of Compensation
• Cash Salary! • How much is enough? (Memo #7)
– Principle of thirds– Reflects the market value of the work– Is reviewed “at least” annually– Review includes performance (Benchmarks)
http://compstudy.lifeway.com
Pensions and Benefits USAChurch of the Nazarene
The Bi-vocational Pastor
• Depending on one’s definition, as many as half of clergy are “dual employed.”
• Reimburse expenses first, then take tax‐favored benefit payments (e.g., disability insurance).
• Don’t forget about retirement!IDEA: Report your pastoral work and your
secular work to your board.
Pensions and Benefits USAChurch of the Nazarene
It Matters How “Pastoral Ministry” Expense is Paid!
Third: Partially Tax-Favored Benefits
Finally: SalaryFinally: Salary First: Expense Reimbursements
Second: Tax-Favored Benefits
Pensions and Benefits USAChurch of the Nazarene
Serving Those Who Serve
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888‐888‐4656
(If English is not your language of choice, please don’t hesitate to call P&B representatives who have access to a service that allows ministers to have
conversations interpreted in real time in their fluent language).