Congregation as Employer Beginning on p. 26 of Treasurer’s Handbook

A Short Quiz! 1. In general, the IRS treats ministers as: A) Employees of the congregation B) Self-employed C) Both D) Servants of God and the state should stay out of it!

A Short Quiz! In general, the IRS considers ministers to be: A) Employees of the congregation B) Self-employed C) Both D) Servants of God and the state should stay out of it!

True or False? 2. Ministers can request to designate up to 100% of their salary as housing allowance as long as they can justify the amount as allowable expenses. True

3. Which one is NOT considered “taxable income” for clergy? A) Housing Allowance B) Social Security Offset C) Reimbursement for health insurance premiums with an Individual Plan D) Salary

3. Which one is NOT considered “taxable income” for clergy? A) Housing Allowance B) Social Security Offset C) Reimbursement for health insurance premiums with an Individual Plan D) Salary

4. In most circumstances, at year end congregations should give pastors: A) A 1099 form B) A W-2 form C) A nice handwritten note for a job well done.

4. In most circumstances, at year end congregations should give pastors: A) A 1099 form B) A W-2 form C) A nice handwritten note for a job well done.

4. In most circumstances, at year end congregations should give pastors: A) A 1099 form B) A W-2 form C) A nice handwritten note for a job well done.

5. Personnel Policies should include: A) Compensation Policies B) Annual Review Process C) Relationship and Behavior Policies D) All of the above plus more E) We don’t need a Personnel Policy. We are a church not a business!

5. Personnel Policies should include: A) Compensation Policies B) Annual Review Process C) Relationship and Behavior Policies D) All of the above plus more E) We don’t need a Personnel Policy. We are a church not a business!

Congregation as Employer Personnel Policies Compensation for Clergy Withholding for Lay and Clergy Pension Fund Health Insurance

Personnel Policies Begin with Values: We are a Church. We are not a business We are a Church but we need to be businesslike. What are our values as a church and how are they reflected in our policies? Welcoming? Missional? Leading rather than following?

Personnel Policies Compensation Policy Describe what benefits employees receive Caution: Be careful about being too specific. If some parts are negotiable you don’t want to stipulate they will be included. Caution: Be even-handed. There may be differences in benefits for FT or PT, or clergy/lay, but not between employees of equal status.

Personnel Policy Family Leave? GA1333: Regarding Parental Leave BE IT FURTHER RESOLVED that all expressions of the church consider adopting maternity or paternity leave policies. The policy would provide for at least eight weeks paid with full benefits, not including vacation time, sabbatical, or sick leave. The policy would permit this time to be taken within the first six months of a child’s life or in the first six months after a child is adopted and that this time may be altered prior to or following a child’s arrival due to fluctuating church, medical, and adoptive needs; and

Personnel Policies BE IT FURTHER RESOLVED that all expressions of the church consider adopting the Family Medical Leave Act, which provides additional leave for medical- related matters for all employees, but from which the church is legally exempt; and BE IT FURTHER RESOLVED that maternity and paternity leave be negotiated at time of call, when possible; and FINALLY, BE IT RESOLVED that these standards and practices are submitted to emphasize the importance of our employees, while modeling compassion, Sabbath, justice, and hospitality.

Personnel Policies Employment Policies Include such things as process for grievances Conflict of Interest Equal Employment (Is being a Christian a requirement?) Whistle blower policy Harassment or Misconduct Recommend: Clergy Misconduct includes reporting offense to Region for consideration under Regional Misconduct Policy.

Annual Review Do it!

Compensation for Pastor Compensation: Salary + Housing Benefits: Pension, Health Insurance, SS Offset, Contributions to other savings accounts Reimbursable Business Expenses: Continuing Education, Assemblies, Books, Travel Reimbursement

The Pot of Money Argument

$60,000 in the pot (lot of money!) (Health Insurance) (Continuing Education/Books/Travel) (14% Pension Fund) = $39,500 Salary and Housing

Putting the Pieces Together Salary: Taxable income. Housing: Non taxable for Income Tax but included in Social Security Tax. Must be designated as housing by board in advance of church year Lower amount of FRV or actual allowable expenses. Up to the pastor to prove expenses if audited

Putting the Pieces Together Benefits: Pension Fund (14% of Housing+Salary) Health Insurance Social Security Offset: 7.65%, taxable Other savings accounts

Putting the Pieces Together Other Benefits Vacation Sabbatical Family/Medical Leave Continuing Education (# of days)

Putting the Pieces Together Reimbursable Expenses: Cost of Doing Business Travel Continuing Education/Assemblies Books, Professional Expenses Reimburse! Don’t give lump sums up front (becomes taxable income)

Putting the Pieces Together Withholding for clergy Generally: don’t withhold either income or SS tax for clergy. (Do need to withhold L&I) Clergy may request you to withhold and pay their Income tax (they must pay own SS tax) They can request you withhold extra income tax to cover SS tax Have early opt out opportunity for SS

Lay Employees Salary vs. Hourly Need to withhold Pension? Health Insurance? Other benefits?

Health Insurance, What to Offer? Negotiate how much and whether or not employee will contribute Balancing values with reality Impacts of Affordable Care Act

L&I (Workman’s Comp) Need to pay for clergy and lay Salaried employees: need to all be the same. (All full time, or submitting time cards) Need to pay for all employees including contract staff like guest preachers!

Questions?