48733 RBI CallPkg17InsvF - PCA Retirement & Benefits, Inc. · as well as an act of faithfulness. PCA Retirement & Benefits, Inc.’s Role RBI is a denominational agency of the PCA,

PCA CALL PACKAGEGUIDELINES20

17

Through this document, PCA Retirement & Benefits, Inc. seeks to serve our churches by providing best practice guidance regarding the content and structure of a minister’s compensation package. It is also intended to provide instruction about other important human resource issues affecting PCA ministers.

1700 North Brown Road, Suite 106

Lawrenceville, GA 30043

Toll free: 800-789-8765

The PCA Call Package Guidelines are provided with the understanding that neither the Presbyterian Church in America, nor any of its agencies or committees

are engaged in rendering legal or accounting services or advice. If expert assistance is needed, the services of a competent professional should be sought.

These Guidelines are revised or updated annually in print, and digitally revised or updated as necessary during the year and available on our website at

www.pcarbi.org. Due to the ever-changing legal environment governing these matters, always make sure that you are referencing the most recently updated

version of these Guidelines.

Circular 230 Disclaimer: This guide should not be viewed as legal, tax, or other advice. Any tax advice contained in the body of this material was not intended

or written to be used, and cannot be used, by the recipient for the purpose of (1) avoiding penalties that may be imposed under the Internal Revenue Code

or applicable state or local tax law provisions, or (2) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

Copyright © 2017 PCA Retirement & Benefits, Inc. All rights reserved. (Volume 6, Issue 1 • 2017)

2017 PCA CAll PACkAgE gUIDElINES

PCA Retirement & Benefits, Inc.’s

Vision & Mission

Our Vision

That all PCA pastors and their families are well prepared and cared for in their retirement years.

Our Mission

To prepare and protect PCA co-laborers in Christ by providing products

and guidance in retirement, insurance, relief and related services. We

aim, through trusted relationships with our partners, to enable and

encourage them to be more focused on ministry.

2


TABLE OF CONTENTS

Introduction to the PCA Call Package Guidelines ............................................................... Page 4

A Call Package Defined .......................................................................................... Page 4

The Purpose of This Document ................................................................................... Page 4

PCA Retirement & Benefits, Inc.’s Role ......................................................................... Page 4

The Proper Uses of this Document .............................................................................. Page 5

Elements of the PCA Call Package Guidelines .................................................................... Page 7

Salary .................................................................................................................. Page 7

Housing Allowance ................................................................................................. Page 9

Benefits................................................................................................................. Page 12

Vacation, Leaves of Absence, Sabbatical .................................................................... Page 18

Reimbursable Expenses ............................................................................................ Page 20

Other Considerations ........................................................................................................ Page 21

Small Churches ...................................................................................................... Page 21

Social Security – Important Considerations .................................................................. Page 21

Ministers’ Dual Tax Status ......................................................................................... Page 23

Ministers’ Options in Paying Taxes ............................................................................. Page 23

Challenges in Preparing Ministers’ Returns ................................................................... Page 24

Separation from Service ........................................................................................... Page 25

Workers’ Compensation Insurance ............................................................................. Page 25

The PCA Ministerial Relief Ministry ............................................................................... Page 26

PCA Call Package Recommendation Summary .................................................................. Page 27

Presbytery Implementation Resources Addendum ............................................................... Page 29

Letter to Presbyters ................................................................................................... Page 31

Procedures for Implementing the PCA Call Package Guidelines in Your Presbytery ............... Page 32

Sample “Policy” Motion ........................................................................................... Page 35

Sample “Letter to Churches”—Informing and Explaining the Reasons for the Policy ............... Page 37

Call Package Evaluation and Review Worksheet ………………………………………………Page 39

Sample Forms and Policies ................................................................................................ Page 41

Housing Allowance Worksheet I – Manse ................................................................... Page 43

Housing Allowance Worksheet II – Rental or Mobile Home ............................................ Page 45

Housing Allowance Worksheet III – Home Owner ........................................................ Page 47

Housing Allowance Resolution .................................................................................. Page 49

Sabbatical Policy.................................................................................................... Page 51

Accountable Reimbursement Policy ............................................................................. Page 53

Accountable Reimbursement Form .............................................................................. Page 54

The Recommended Form of Call to a PCA Minister ....................................................... Page 55

3


Resources recommended for use with these guidelines are:

Church and Clergy Tax GuideBy Richard R. Hammar, J.D., LL.M., CPAChristian Ministry Resources • www.yourchurchresources.com

Zondervan Minister’s Tax and Financial GuideBy Dan Busby, CPAZondervan • www.zondervan.com

Worth’s Income Tax Guide for MinistersBy B.J. Worth, EA, ATA, CTP • www.worthfinancial.com

Ministers’ Taxes Made Easy By Dan Busby, Michael Martin, John Van Drunen • www.pcarbi.org

Church Reporting Made EasyBy Dan Busby, Michael Martin, John Van Drunen • www.pcarbi.org

Tax Guide for Churches and Religious OrganizationsIRS Publication 1828 • www.irs.gov

For additional questions, please contact PCA Retirement & Benefits, Inc.

PCA Retirement & Benefits, Inc.1700 North Brown Road, Suite 106Lawrenceville, GA 30043

(678) 825-1260(800) 789-8765(678) 825-1261 FAXwww.pcarbi.org

PREFACE

The original edition of the PCA Call Package Guidelines was developed by PCA Retirement & Benefits, Inc. (RBI), an agency of the Presbyterian Church in America, in 2011 in consultation with the Office of the Stated Clerk/Administrative Committee of the Presbyterian Church in America. RBI also partnered with stated clerks from each Presbytery to find teaching and ruling elders who had interest in this project or expertise in the field of human resources. Based on this feedback and advice from other professionals (e.g. attorneys, accountants, etc.), a number of enhancements and additions to the initial draft were made. In 2012, the completed document was presented to the PCA General Assembly (GA) for approval. The 40th GA received the PCA Call Package Guidelines, and exhorted Presbyteries and member churches to implement their use. This copy is the sixth edition (2012 was the first) of the PCA Call Package Guidelines and includes a number of updates and enhancements.

This booklet is designed to provide accurate and authoritative information on ministers’ compensation packages. It is also intended to provide instruction about other important compensation and tax issues affecting PCA ministers. These guidelines are not mandatory, but their use is highly advisable for churches and Presbyteries concerned about the financial security of their ministers.


4

A Call Package DefinedIn its simplest terms, a call package is a minister’s compen-sation package. We refer to it as a call package because that is the term used by the PCA Book of Church Order (e.g. BCO 20-6). A “call” is more than the internal call by the Holy Spirit to the minister; it is also a church or other organization acceptable to a Presbytery requesting a Teaching Elder to exercise his ministry on a regular basis.

The Purpose of this DocumentA recent survey of Presbyterian Church in America (PCA) ministers revealed that a significant majority of ordained ministers in the PCA desire more assistance in structuring their compensation packages. The survey, commissioned by PCA Retirement & Benefits, Inc. (RBI) and conducted by PricewaterhouseCoopers, did not address the issue of sal-ary for ministers and this booklet will not suggest appropri-ate salary levels for ministers. That, of course, is a respon-sibility of PCA churches and Presbyteries. Instead, with this booklet we are attempting to provide ‘best practice’ guid-ance regarding the content and structure of ministerial call packages for ordained clergy. It is our hope that this docu-ment will be a valuable reference for ministers, churches, Sessions, Presbyteries and PCA-related organizations. In writing this booklet, every attempt has been made to cre-ate broad-based support by inviting compensation experts from every Presbytery to participate in creating this booklet. We pray that God would use this valuable resource for the edification of His Church and the propagation of the Gospel.

We recognize that the issue of clergy compensation can be difficult, or even controversial. There may be circum-stances, for example, where a man may feel called by God to serve a church that is unable to provide elements of compensation customary for similar positions. It is not our intention to pass judgment on such circumstances. We would, however, strongly assert that every effort should be made to adequately compensate a minister of the Gospel for his work. In Paul’s encouragement to his

brother Timothy, two very important and helpful principles are set forth.

“Let the elders who rule well be considered worthy of double honor, especially those who labor in preach-ing and teaching. For the Scripture says, ‘You shall not muzzle an ox when it treads out the grain,’ and, ‘The laborer deserves his wages.’” (I Timothy 5:17–18, ESV)

“If anyone aspires to the office of overseer, he de-sires a noble task. Therefore an overseer must be above reproach, the husband of one wife, sober-minded, self-controlled, respectable, hospitable, able to teach, not a drunkard, not violent but gen-tle, not quarrelsome, not a lover of money.” (I Timothy 3:1b–3, ESV)

These Scriptural verses clearly make two points. First, a minister should receive just and reasonable compensa-tion for his labors. And second, he should be content with those wages. Ultimately, both of these principles are issues of the heart, and it is beyond the scope of this document to fully address them here. Nevertheless, we have sought to provide helpful financial information to those endeavoring to pursue faithful obedience in these matters. It is our hope that this booklet will describe the appropriate components of clergy compensation, be of assistance to ministers, churches, and Presbyteries desir-ing to structure adequate call packages, and motivate churches and Presbyteries to regard the provision of these components as an expression of love for their shepherds, as well as an act of faithfulness.

PCA Retirement & Benefits, Inc.’s RoleRBI is a denominational agency of the PCA, and our min-istry since its inception has been one of support to PCA churches, church-related organizations, and PCA church servants. We assist over 1,600 PCA churches and church-related organizations by providing cost effective employee

INTRODUCTION

5


These guidelines are intended to assist you with that important calling.... They can be used as a springboard for discussion with your Session or Diaconate when reviewing an existing call...

benefits plans which include a 403(b) Retirement Plan as well as Term Life, Long Term Disability, Vision, and Dental Insurance Plans. Our supervision of these plans helps re-duce the burden on our ministry partners.

We regularly work with a number of industry experts who advise and inform us of new rules and regulations that affect our ministers and churches. RBI also belongs to a church association that studies, advocates for, and disseminates information about church employee benefit programs. In short, we do the heavy lifting so churches can put more of their precious resources towards the min-istry of the Gospel.

RBI also has a deep commitment to our ministers and their families. These men have answered the Lord’s call to lead, shepherd, oversee, and care for PCA church families, often accepting calls with little regard to salary or benefits. We feel it is our duty to help these men by providing financial guidance. We recognize that simply offering benefit plans to our ministers doesn’t necessarily translate into financial security, or faithful stewardship. We hope that the financial guidance we provide will assist ministers in properly as-sessing and planning for their family’s financial future.

Another ministry close to our hearts is Ministerial Relief. Through this ministry, we have the privilege and respon-sibility of assisting our retired and disabled ministers and their widows in times of financial need through the Minis-terial Relief Fund. In our many years of Ministerial Relief experience we have seen the devastation that disability or death brings upon a minister and his family. We are ministering monthly to elderly widows who have outlived their retirement savings and are no longer able to afford the basic necessities of life on their own. We understand the circumstances that put our PCA ministers and their fami-lies at risk of catastrophic loss, and we are thankful for the Lord’s provisions and the privileged role that we have to assist them.

We also delight in our role as a partner in the Gospel, and as an advocate for our PCA churches and ministers. It is our hope and prayer that the PCA Call Package Guide-lines will assist our churches in developing a stronger part-nership with their ministers and help to establish a firm financial footing for our ministers and their families. These guidelines are offered to assist our PCA ministers and the churches they serve in structuring call packages that better

manage these risks through appropriate insurance prod-ucts and retirement planning.

The Proper Uses of this Document The 2012 PCA General Assembly exhorted Presbyteries and member churches to implement the PCA Call Pack-age Guidelines. To truly profit from these guidelines, they should not only be thoroughly read, but also implement-ed. Ministers, Ruling Elders, and Deacons as well can all benefit from the guidelines and must share equally in their implementation.

MinistersThe responsibilities of ministry can be all-consuming. But the Lord has also laid upon you, as husbands and fathers, the fundamental responsibility of providing for your own family’s welfare (I Timothy 5:8, ESV). These guidelines are intended to assist you with that important calling. Use them to educate yourself, and become acquainted with the fi-nancial aspects of your call.

Familiarity with these guidelines can help you evaluate the sufficiency of a call. They can be used as a springboard for discussion with your Session or Diaconate when review-ing an existing call, or when considering a proposed call from a prospective congregation. Some calls may need to be restructured or improved. Other calls may require additional funding from some creative or tent-making sources. But, at the end of the day, you must determine whether a particular call adequately provides for the cur-rent and retirement needs of your family. After all, it is your responsibility to make sure that your wife can pay the bills one day if God calls you home first!

6

Sessions and Diaconates

In light of the 2012 PCA General Assembly’s exhorta-tion, local churches also should seek to implement these guidelines thoroughly. As congregational leaders, Ruling Elders and Deacons have been entrusted with the bib-lical stewardship of providing for the financial welfare of their ministers and their families (I Timothy 5:17–18, ESV). To that end, congregations and leaders are mor-ally constrained (BCO 20-6: “obliged”) to make public promises to their ministers, and to present those promises to Presbytery—promises to provide “all proper support,” and promises that under your care they will be free from “worldly cares and avocations.”

Keeping these promises can be challenging! Faithfulness requires nothing less than a heart for God, a heart for your minister and his family, and a good working knowledge of the financial issues involved. These guidelines were devel-oped to assist you with this important calling by increasing your understanding of the financial aspects of your minis-ter’s call. They will help you identify the necessary com-ponents of a well-structured call package, and help you clarify the differences between your minister’s compensa-tion and your own.

Use these guidelines as an educational tool. Communi-cate these to all who need to be aware of them, including members of your Diaconate and Finance Committee. Use them to evaluate the sufficiency of a call package that you plan to offer a prospective minister. Or, simply use them to review the sufficiency of your current minister’s call package. Financial reviews should be conducted annu-ally for adequacy and sufficiency. Ask: “Does our minis-ter’s call package minimize risks and provide adequately for his wife and family today, and in the years in which he will no longer be able to work? Is our minister’s family, and our church, adequately protected if something should happen to our minister?”

PresbyteriesPresbyteries also have a responsibility to evaluate the ad-equacy and sufficiency of call packages. Called to guard and protect the welfare of the congregations and minis-ters entrusted to their care by examining and evaluating candidates, and call packages, presbyteries directly bear the burden of their brother’s welfare. For this reason, the 2012 PCA General Assembly also exhorted Presbyteries to discharge their duty by implementing these guidelines. How might these guidelines be best implemented? We believe that these guidelines would be best implemented by establishing a presbytery policy. This does not neces-sarily mean changing presbytery bylaws. Policies are simply agreed upon rules clarifying how things will be typically be handled going forward. A policy creates expectations, establishes an acceptable standard, and can keep these guidelines from being ignored or forgot-ten. And a policy lessens the potential for misunderstand-ings when call packages are presented to presbytery. A ‘Presbytery Implementation Resources Addendum’ section has added to the PCA Call Package Guidelines; and to further assist you, each of these resources are avail-able in a downloadable and customizable format on www.pcarbi.org. Just go to our website and using your mouse, hover over ‘Forms & Resources,’ click on ‘RBI Publi-cations,’ and then select ‘Presbytery Documents’ under Call Package Resources. Please feel free to adopt, adapt, or alter these resources for use in your Presbytery.

Specifically, presbyteries need to establish a policy that every call package presented to Presbytery reflects inter-action with these Guidelines by breaking-out separate, specific, and sufficient amounts for each necessary com-ponent of the call package. Furthermore, they need to assign the responsibility to implement these Guidelines to a particular Committee, and communicate the policy to all of their churches to avoid misunderstandings. And, as soon as possible, the Committee that examines and approves call packages should enter into conversation with churches developing call packages to assist them in the process. Every call should be examined by a com-mittee for adequacy. And helpful suggestions should be offered to rectify shortcomings. Hopefully, this will in-crease the efficiency of our Presbyteries and eliminate awkward discussions about the sufficiency of a call on the floor of Presbytery.


7


Salary

The purpose of this section is to encourage the church to care for its ministers in such a way that they fulfill their promise [from the PCA Book of Church Order (BCO)] to ensure that these men and their families are “free from worldly cares and avocations.” (BCO 20-6)

There is no better place to begin this topic of a minis-ter’s compensation than the Bible. In 1 Timothy 5:17–18 (ESV), Paul states clearly that a minister should be paid for his work and quotes Deuteronomy 25:4 and Leviticus 19:13 to make his point from Old Testament Scripture. This teaching is repeated in 1 Corinthians 9:7–12 where he argues that those who serve the church are workers who are deserving of their wages. Jesus as well taught his disciples in Luke 10:7–8 and Matthew 10:10 that they should expect to be cared for by those whom they came to serve. While this is not an exhaustive exegesis of the topic, it is abundantly clear from Scripture that a minister should be fairly paid for his labors to the church.

The subject of a minister’s compensation has the po-tential to set off alarm bells. One alarm might be an effort to set minister salaries from a denominational mandate instead of a complex set of reasonable fac-tors (i.e. actual cost of living, experience, credentials, scope of responsibilities, unusual circumstances, etc.). Setting salary levels for ministers in the PCA is not the purpose of this portion of the Guidelines. Our desire is to help churches thoughtfully reflect on these complex issues. Determining an appropriate salary level is truly challenging, but it is a necessary consideration for ev-ery minister. As you study these issues, please carefully consider the following principles.

At a minimum, a minister should be paid at least enough to live at the accepted standard of living of the congregation or the Session which he is serving. It is all too tempting for some to say (or think), “I don’t understand why we have to pay Pastor Joe so much! In my day I was able to get by on half of that with four children.” Because of inflation over the past 20 years,

the costs associated with maintaining a household have risen dramatically. It would serve the church well to complete a thorough personal budget analysis for an incoming minister before he is hired and to give him an opportunity to review and to point out weaknesses in that analysis before issuing a call. When a minister does point out a weakness in a proposed budget or call package (or even in his current call package), his comments should always be viewed graciously as an evidence of faithful concern for his family, and not as an indication that he is “in the ministry for the money.”

Care should be taken to avoid extremes. A minister serving in Palm Beach, Florida doesn’t need a chauf-feured limo, nor should he be required to live in grind-ing poverty if he serves in Haiti. The PCA Book of Church Order (BCO) provides an excellent standard for the financial care of a minister and his family. BCO

20-6 states, we (the church) “do earnestly call you to undertake the pastoral office in said congregation, promising you, in the discharge of your duty, all proper support, encouragement and obedience in the Lord. That you may be free from worldly cares and avoca-tions, we hereby promise and oblige ourselves to pay you the sum of…” If a minister living conservatively is unable to makes ends meet on the salary provided, then he is not free of worldly cares and avocations. In fact the stress created by the financial pressure he is under may significantly erode his ability to minister effectively to his congregation.

ELEMENTS OF A CALL PACKAGE

If an annual review of a minister’s compensation is not done, then inflation will erode the purchasing power of his compensation over time.

8


Paying a minister a competitive salary involves evaluating several other important factors. Just as the secular world pays higher salaries for certain professional capabilities, so should a minister’s extensive educational background, technical abilities, and experience be reflected in his remuneration. Moreover, specific pastoral responsibilities, church budget limitations, and other unique circumstances are also an important part of this larger and more complex compensation equation. In view of these issues, churches should carefully weigh each element, including the specific needs of their minister and his family, the cost of living in your particular area, and the salaries of similarly qualified individuals. Specific information from salary surveys might also be helpful; they may be acquired from the following resources:

PCA Administrative Committee (678) 825-1000 (to request a copy of the PCA Pastors Compensation Study)

National Association of Church Business Administrators www.ministrypay.com

Compensation Handbook for Church Staff www.yourchurchresources.com

Once a call has been issued to a minister, every church should schedule at least an annual reevalua-tion of the minister’s compensation. This job is best ac-complished by a committee of the Session having the authority to talk directly to the minister. Church leaders should understand that most ministers are naturally un-comfortable talking about money and many will not press the issue. But church leaders should take very se-riously their promise to properly support a minister and his family by keeping him free from worldly cares and avocations. A private meeting between a trusted mem-ber of the Session and the minister is often a perfect time to ask “Pastor, how are things going financially for you and your family… really?”

If an annual review of a minister’s compensation is not done, then inflation will erode the purchasing power of his compensation over time. All too often a minister and his family will suffer in silence and begin to accumulate

Many churches in the PCA create call pack-ages using the “Lump Sum” approach. A church taking this approach will provide a lump sum dollar amount to their new minister (often greater than or equal to the lump sum given to the previous minister).

A minister is then responsible to determine how that money is spent on him and his family. While the lump sum approach may appear gracious at first glance, most people in secular vocations would reject such an arrangement.

The lump sum approach for many of our church-es, is really more of a payment method than a true compensation approach. If it were a compensation approach, churches would use appropriate method-ologies (described on pages 7–9) to formulate the lump sum amount. Taking the time to create a thor-ough compensation package is not an easy task! An exhaustive approach may take into consideration local living expenses, tax rates, housing cost, school-ing of children, the cost of benefit plans, and more. Because of the complexity, many churches resort to the lump sum approach. Rarely does this approach serve the best interest of our ministers.

So, what is specifically wrong with this compensation approach?

First, the “Lump Sum” approach may create a larger tax liability for PCA ministers. A minister may be paying for benefits on an after-tax basis resulting in the payment of unnecessary taxation. Instead, the church should directly pay the benefits, wherever possible, on a pre-tax basis, thus avoiding this tax expense.

Secondly, the “Lump Sum” approach can be unin-tentionally misleading to both ministers and Sessions. The confusion centers on the difference between “total compensation” (i.e. lump sum amount) and “salary.” A salary figure refers to the base pay an employee receives in exchange for their work. This is the amount people quote when a person asks them how much they earn. Compensation, on the other hand,

CONSIDER THIS:

Continued in sidebar on page 9

The Shortcomings of a Lump Sum Approach to Compensation

9


debt. With such a burden hanging over his head, it is hard to imagine a minister in this circumstance experi-encing maximum effectiveness in his labors.

Frequently, hard choices must be made when it comes to the church budget, and staff salaries are a large part of any church budget. Given the PCA’s high biblical priority on the preaching of the Word and the administration of the sacraments, all churches must give high priority to this portion of the budget. For in-stance, if there is a choice between giving the minister

a needed raise or making improvements to the church building infrastructure, choosing to support the preach-ing of the Word is the right choice.

Finally, and perhaps most importantly, a church should never pay a minister using the “Lump Sum” Methodology. The adjacent side-bars on page 8–10 will address our concerns with this type of methodology.

Housing AllowanceThe minister’s housing allowance is the most im-portant tax benefit available to a PCA minister. Or-dained and licensed PCA Ministers who live in a church owned manse, rent a home, or own a home may be eligible to receive a housing allowance (sample housing allowance worksheets and resolution form can found on pages 43–49). With this benefit, a minister can exclude a portion of his income as a housing allowance under Section 107 of the Internal Revenue Code.

refers to monetary and non-monetary pay a per-son receives for performing their job, such as salary, benefits (i.e. medical, retirement, life insurance, long term disability insurance), bonuses and perks. Salary is only one of several components included in a per-son’s compensation. While most people are familiar with their salary figure, many do not know the dollar value of their total compensation.

When a minister is quoted a lump sum figure by a church, he often misconstrues it to be the amount of his “salary.” This is understandable given that most new hires are quoted a salary figure and not a total compensation dollar amount. This is the root of the problem. The lump sum figure tends to give our ministers the false impression that they have more in discretionary income than the call may actually provide. Often, this leads to budgeting mistakes. For example, ministers who purchase and finance a home based on the lump sum amount may quickly discover that they are “house poor,” with insufficient income to adequately maintain their home, save for retirement, or provide other important benefits for their families. And ministers aren’t the only ones to think lump sum figures are synonymous with salary figures. Church leaders often confuse these terms as well and mistakenly conclude that their minister’s salary is more than sufficient when that might not be the case.

Thirdly, when calls are approved by the congre-gation, “Lump Sum” amounts are stated publicly. Understandably, most congregational members also conclude that this figure is the minister’s salary.

This creates a difficult, uncomfortable, and unfair situation for the minister, and may potentially hinder his ministry with individuals who erroneously con-clude that he is “overpaid.” Because this issue is so widely misunderstood, we urge leaders to carefully consider how to most effectively communicate the call package. The congregation must approve the finan-cial details of the call in order for those details to be presented to Presbytery. This cannot be avoided. But leaders ought to avoid the written or verbal use of a “Lump Sum” amount when publically presenting the call package to the congregation. Whether pack-age details are printed in a handout, or shown on an

Continued in sidebar on page 10

Continued from sidebar on page 8

10


Housing Allowance LimitationsThe IRS places limitations on the amount that can be designated as housing allowance. It is important for churches and ministers to be aware of these limits and to manage this benefit wisely. Each year a minister’s housing allowance should be prospectively designated by his PCA church and noted in the Session minutes (i.e. designated in advance of the coming year, in December or earlier—it cannot be designated retroactively). The tax code only requires that a church designate the housing allowance exclusion, not determine it, or inquire into its reasonability. Therefore, ministers themselves must calculate their anticipated expenses, and consult with their Session regarding the amount of the designation.

Section 107 of the tax code lays out a framework for cal-culating the maximum amount that can be excluded by law. Sessions should keep this in mind when designating a minister’s housing allowance. However, ministers them-selves are responsible for keeping records to substantiate their actual housing allowance expenses, calculating the maximum amount of housing allowance they are eligible to exclude from their income, reporting any excess housing allowance as earned income on their personal tax returns, and paying any additional taxes.

The tax code specifies that housing allowance is excluded from income only to the extent that it is used for one home, and falls within these guidelines:

• It cannot exceed the amount designated by the church.

• It cannot exceed the amount of actual expenses incurred in owning or renting a home.

• It cannot exceed the fair rental value of a home including furnishings plus utilities.

1. Designated Housing AllowanceEstimating expenses a full year in advance can be chal-lenging. As previously stated, if actual expenses exceed the amount of housing allowance designated by the church, the minister will be limited to the amount designat-ed by the church. For this reason, ministers should estimate liberally in the calculation of their housing allowances, and Sessions should be generous in their designations. After all, ministers should be allowed to maximize their use of this important benefit.

overhead screen, the call should be verbally present-ed in a summary manner focusing on the individual components of compensation being provided—cash salary & housing allowance, employee benefits, and vacation (a sample Recommended Form of Call to a PCA Minister can be found on pages 43 and 44).

Moreover, after approving and adopting an annual budget, many Sessions also present their budget to their congregation. And, for similar reasons, it is also important that the budget not present to the congregation the minister’s total compensation as a ‘Lump Sum’ amount on one line. Budgets should account for call package components separately (i.e. salaries, housing allowance, employment tax-es, insurance benefits, and retirement benefits, ac-cording to best practices in order to provide clarity and transparency. This approach to annual budget presentations should also help church members bet-ter understand the minister’s actual compensation.

It would be impossible for this document to answer every potential question about a minister’s salary. By God’s grace, however, there are several resources available for ministries and churches need-ing assistance in the PCA. PCA Retirement & Benefits, Inc. has significant experience in the area of ministe-rial compensation and benefits. In addition, the PCA Administrative Committee conducts an annual com-pensation survey for the denomination, and most Presbyteries have at least one church business admin-istrator who has dealt with most of the typical ques-tions asked. You are not alone, and your questions will be gladly received.

Continued from sidebar on page 9

11

2. Actual ExpensesMost PCA ministers have one of three living arrange-ments. A) They live in a church owned manse; B) they live in a rented home; or C) they own their own home. The greater the personal stake you have in your living arrange-ment, the greater your housing allowance will be. Ministers living in a manse can exclude the following from their cur-rent income: utilities, furnishings, appliances, landscaping, yard maintenance, pest control, personal property insur-ance, umbrella liability insurance, and personal property taxes on contents. Ministers living in a rental home can count all of the previously mentioned exclusions, and they can also include rental housing payments. Ministers who own their own home can exclude the following for fed-eral income tax purposes: utilities, furnishings, appliances, landscaping, yard maintenance, pest control, umbrella liability insurance, structural repair, down payment on a home, mortgage payments, homeowners insurance, home improvement loans, real estate taxes, real estate escrow and commission, and association dues. It is important that ministers review and compare their actual expenses to their designated expenses before they file their taxes. If the actual expenses are less than their designated expenses, ministers are limited to the amount of their actual expenses. Any excess between the actual expenses and the desig-nated expenses must be declared as additional income and appropriate taxes should be paid.

3. Fair Rental ValueFair Rental Value typically places a cap or an upper-limit on how much Housing Allowance you can take. Since there are no authoritative sources that explain exactly how this value is to be calculated, you might consider the following suggestion: consider asking a local realtor or real estate appraiser to provide the church with a written estimate of how much a furnished house similar to the one you own and in your location would rent for on the open market. Some websites may allow you to determine the Fair Rental Value from the convenience of your home. If furnished home data is not available, calling a furniture rental company for assistance with estimating that cost may be helpful. Do not forget to include utility costs based on actual utility expenses. Regardless of your methodology, it is important to perform this step annually, especially in a climate of shifting property values.

Housing Allowance in RetirementIn retirement, PCA ministers are also eligible for the housing allowance exclusion. Though this provision is not well known in the PCA, RBI, the retirement and wel-fare agency of the PCA, is authorized by Revenue Ruling 75-22 to designate housing allowance amounts for all honorably retired ministers who receive retirement plan payments from the PCA Retirement Plan. This provision may provide significant tax savings to you during your retirement years! However, this im-portant benefit will be forfeited if you transfer your retire-ment assets from the PCA Retirement Plan to a bank, brokerage firm, insurance company or other financial services provider.

The Housing allowance can significantly reduce a PCA minister’s tax liability when properly used during pre- and


The housing allowance can significantly reduce a PCA minister’s tax liability when properly used during pre- and post-retirement. If PCA churches or ministers have any questions about effectively managing the housing allowance benefit, contact RBI.


...it is important that both churches and ministers look for opportunities

to contain costs. For ministers, this means ensuring you and your

family are living a healthy lifestyle. For churches this means being

actively engaged in finding cost-effective health care.

post-retirement. If PCA churches or ministers have any questions about effectively managing the housing allow-ance benefit, they should contact RBI.

Another Recent Challenge to the Clergy Housing Allowance Exclusion On April 6, 2016, the Freedom From Religion Founda-tion (FFRF) filed another lawsuit challenging the tax bene-fits of the Minister’s Housing Allowance in the Western District of Wisconsin arguing that the Minister’s Housing Allowance violates the Establishment Clause of the First Amendment by providing preferential tax benefits to min-isters of the gospel. On November 17, 2016, Judge Crabb set the deadline for all dispositive motions at March 8, 2017. Whether this case represents a signifi-cant legal challenge to ministerial housing allowance is not yet known. RBI will continue to follow this case and provide updated information on our website as it be-comes available. However, those interested in further

information can search the internet for ‘Gaylor, et al vs. Lew, et al’ or ‘the United Sates District Court for the West-ern District of Wisconsin case number 16-CV-215.’

BenefitsOne of the cornerstones of a good call package is a strong benefits plan that includes at a minimum, retirement savings, health insurance, disability insurance, and life insurance, as well as Social Security, Medicare and a home equity allowance (when applicable). When a church provides the insurance components of a minister’s benefits, often the money contributed by the church is not considered taxable income for the minister. However, if a minister directly pays for his own benefits, he will have to pay taxes on the amount he pays for these premiums. Therefore, it is very important that churches directly pay for benefits within the call package to minimize taxes for their ministers.

We recognize that some churches are concerned about the additional cost of paying for benefit plans. What many churches do not realize is that they wield a lot of discretion when it comes to benefit plans. Churches are often able to control costs through their input on insurance plans, plan design, and by shopping carriers each year. Churches concerned about the additional work of creat-ing a well-balanced call package should look to the cost-effective solutions provided by RBI. To learn more, please give us a call at (800)789-8765.

Primary Benefits

1. Health Insurance and Health Sharing Ministries

Healthcare Insurance continues to be one of a minister’s most important benefits because it enables ministers to protect themselves and their families against catastrophic medical emergencies. Often, these emergencies are very expensive and the debt associated with these events can cripple a family. A good health insurance policy (or a Medicare Supplement policy for ministers 65 years old and older) can significantly reduce medical expenses and provide peace of mind to ministers, their families, and the churches in which they serve.

One of the challenges of offering a health plan to employ-ees is the high price of health care. Experts tell us that this trend will continue to be a challenge for the foreseeable

12

13

future. Therefore, it is important that both churches and ministers look for opportunities to contain costs. For min-isters, this means ensuring you and your family are living a healthy lifestyle. For churches this means being actively engaged in finding cost-effective healthcare solutions.

Before a decision can be made on a health solution, church-es must have a good understanding about two categories of health insurance plans: individual and group. Though it may be permissible for any church to provide group coverage, some churches and organizations are required by law to pro-vide group insurance. The Patient Protection and Affordable Care Act (PPACA), commonly called the Affordable Care Act (ACA) or “Obamacare,” requires all employers with 50 or more FTE’s (the equivalent of 50 or more full-time employees), to provide affordable group healthcare insurance coverage for their employees. Churches and organizations with less than 50 FTE’s are not obligated to provide group healthcare coverage, but they are strongly encouraged to provide a group health plan or a salary that is sufficient for ministers and their families to purchase healthcare insurance. It is im-portant to remember that the cost of not carrying adequate health insurance coverage can be financially catastrophic to all parties involved.

GroupGroup healthcare coverage may be purchased directly from insurance agents, brokers, and individual carriers, or, if a church has 25 or fewer FTE’s, coverage may be purchased through the Small Business Health Options Program (SHOP) marketplace as well. There are a wide variety of health insurance carriers that provide a number of health plan options (i.e. HMO, PPO, POS, etc.) at different premium levels. Marketplace plans may also be categorized by four levels of coverage: bronze, silver, gold, and platinum. All categories offer the same quality of care, but differ in how much an employee will pay for deductibles, copayments and total out-of-pocket costs. By shopping rates among carriers and examining multiple levels of deductibles, copays, prescription and hospitaliza-tion coverages, a PCA church may be able to find a cost-effective plan that provides adequate coverage for its staff.

Another alternative to consider are the variety of consumer- driven health plans (aka High Deductible Healthcare Plans—HDHP’s). These plans work in conjunction with a savings account (i.e. health reimbursement account, or

health savings account) to set aside funds for medical ex-penses in the future. The success of consumer-driven health plans is dependent upon employees becoming better purchasers of medical care. The more money employees save in health care expenses, the more money they will keep in their health savings accounts. The benefits do not end there. Typically, premiums for consumer-driven health plans are appreciably lower than other types of plans. However, these do come with one drawback. The de-ductibles for consumer-driven health plans tend to be sig-nificantly higher. Any church considering an HDHP option should make sure the minister or the church has sufficient savings to pay for the deductibles.

Individual There are several options for individual healthcare insur-ance. These plans continue to be offered through insur-ance agents, brokers, and individual carriers. There are a wide variety of health insurance carriers that provide a number of health plan options (i.e. HMO, PPO, POS, etc.) at different premium levels.

Individual plans are also offered through a Federal or State “healthcare exchange” depending upon your State of residence (the Federal exchange website is www.healthcare.gov). Individuals are no longer turned down for pre-existing medical conditions, and policies purchased on the exchange may provide significant tax credits to eligible participants. It may be easier for pastors to qualify for these tax credits (which off-set the monthly premiums) since the Housing Allowance portion of his compensation is excluded from Modified Adjusted Gross Income (MAGI)—the ACA’s qualifying income calculation. Many ministers may find individual policies purchased on the healthcare exchange to be the most cost-efficient policies as a result of these tax credits.

Federal and State healthcare exchanges offer four levels of coverage, categorized as bronze, silver, gold, and platinum, differing only in how much an individual or fam-ily will pay for deductibles, copayments and total out-of-pocket costs. These plans are available during annual open enrollment (November 1– January 31), or at any time during the year when a “qualifying event” for special enrollment occurs (e.g. a move to a new state, a change in income or family size, a loss of job-based coverage, etc…). There is a 60 day special enrollment period


14


following a qualifying event. If an individual is not eligible for special enrollment, short-term health insurance policies can be purchased from individual carriers.

Healthcare Sharing MinistriesLastly, there are non-insurance-based health care shar-ing programs which are exempt from ACA regulations. Members of health care sharing ministries agree to live healthy lifestyles, share each other’s medical expenses every month, and are exempt from the ACA individu-al mandate to purchase healthcare insurance. (ACA Sec.1501) Those considering one of these ministries should be encouraged to carefully examine the organiza-tion, benefits, and costs, and to recognize that sharing programs are not the same as insurance policies; benefits are not contractually guaranteed.

If you are considering making a sharing plan an employ-er provided benefit, you should first seek the advice of a legal or tax professional.

Tax Issues

As recently as 2013, employers were permitted at least two options in providing healthcare as a pretax benefit (e.g. group plans, as well as reimbursed individual plans, aka Employer Payment Plans —EPPs). Group plan health insurance premiums paid by an employer continue to be excludable from Social Security, Medicare and Federal Income tax, but these plans may not be affordable for small churches. However, the ACA essentially eliminated the pretax benefit for employer paid individual plans (EPPs) in 2014.

Recent regulations have made it clear that unless the minister is the only full-time employee of the church, churches are not permitted to continue to reimburse or pay their pastor’s individual insurance plan pre-miums (and it is currently unclear whether this might include the costs associated with sharing programs). As a result, churches may want to simply consider increasing the salary component of a pastor’s call package. Churches are permitted to increase his salary as long as the minis-ter is not obligated to purchase healthcare insurance with this additional income. Keep in mind that pastors and employees will owe applicable Social Security, Medicare, Federal, and State Income tax on this additional income. In December 2016, Congress passed the ‘21st Century Cures Act’ allowing small employers to offer a new type of health reimbursement arrangement (HRA) called a Quali-fied Small Employer Health Reimbursement Arrangement (QSEHRA). For more on QSEHRA’s and other updates, see our website: https://employer.pcarbi.org/benefit-plans/employee-benefit-plans/health-insurance.

In conclusion, if possible, PCA churches are encouraged to provide either health care coverage or a sufficient salary level that would make the purchase of adequate individual healthcare insurance affordable for a minis-ter and his family. If you need further information about ACA issues, and church-related healthcare options, you might start with the ECFA booklet entitled 5 Roads for Healthcare Reimbursements for Churches and Ministries. The booklet is free, and you can obtain a copy online at: www.ecfa.org. However, because of the changing nature of healthcare regulations and the magnitude of the potential penalties involved, unless your situation is clearly described as one of the ECFA’s “5 Roads,” we would encourage you to seek profession legal and tax advice on your specific situation.

2. Retirement Plan

The easiest way for a church to provide a retirement plan for a minister is through the PCA Retirement Plan. RBI is prepared to assist with the myriad of compliance rules and regulations governing retirement plans, so our churches can focus on the ministry of the Gospel.

Churches can effectively use the PCA Retirement Plan to make contributions on the minister’s behalf. The minister may also make additional contributions over and above

15


the church’s contributions by executing a salary reduction agreement. These contributions can be made on a pre-tax basis, a Roth after-tax basis, or some combination of both. Pre-tax contributions reduce your taxable income (i.e. Income and Social Security taxes) for the current year. Alternatively, unless exempt from Social Security, ministers who make traditional IRA contributions must pay a 15.3% self-employment tax (SECA)on all contributions!

Income tax on PCA Retirement Plan contributions and earnings is deferred until you begin taking distribu-tions from the plan. Future distributions will be taxed as ordinary income in the year taken. Alternatively, Roth after-tax contributions do not reduce your current taxable income. The tax advantage comes in the fu-ture, when you can take tax-free distributions of your contributions and their earnings (if you meet certain conditions). Once the amount is determined and the agreement is signed, the church begins to withhold the pre-determined amount from the minister’s salary and contribute it to the PCA Retirement Plan.

Denominational retirement plans, like the PCA Retirement Plan, also provide other unique tax benefits that are not avail-able through a commercial plan. One such benefit is the Annual Housing Allowance. When a minister retires and begins receiving retirement benefits from a denomina-tional plan, those benefits are considered eligible for the tax-free housing allowance exclusion. This benefit can be significant for our ministers. For example, a minister in the 25% tax bracket with $20,000 in annual housing al-lowance would save $116,380 in income tax over a 15-year retirement—and the tax savings would increase for ministers in a higher tax bracket or with a larger hous-ing allowance.

PCA churches and ministers are encouraged to contribute a sum that totals between 10% and 15% of the minister’s annual salary plus their housing allowance. It is wise to designate retirement contributions as a percentage of salary rather than a fixed dollar amount. This will allow contributions to keep pace with salary increases without having to complete a new salary reduction agreement. (For those churches where the minister resides in a church-owned manse, and receives no equity allowance, the calculation of retirement benefits should be adjusted up to reflect the difference between a manse-based housing

allowance and a personal home ownership housing allowance. To do otherwise would underfund the minister’s retirement plan.)

3. Short Term and Long Term Disability Insurance

Disability insurance provides ministers with income in the event of illness or injury. It should also provide a Session with peace of mind. Most PCA churches are not finan-cially financially strong enough to deal with the conse-quences of a minister’s long term disability. What would your church do in the event your minister was disabled? How would you financially support him and who would take on the responsibilities of the disabled minister? Your church may be able to continue this practice for a year, but how about three years, five years or longer? Most PCA churches do not have the financial resources to pro-vide for the salary of two senior ministers (i.e. disabled minister and the acting minister). Having a long term dis-ability policy in place protects not only the minister and his family but also the church.

Having good short term and long term disability insur-ance plans is a cost-effective way of reducing your risk. PCA churches are encouraged to provide a Long Term Disability Plan that replaces at least 60% of income. Most churches self-insure their employees for any short term dis-ability. Be aware that some states have rules governing in-sured and self-insured plans. If your church is in a state that requires short term disability coverage, you should carefully research applicable state law to determine your options.

16


RBI currently offers a number of group long term disability solutions. All RBI LTD products are now considered “after-tax” benefits so that disabled employees will be able to receive tax-free disability income. This means employees will have to pay taxes on the amount of their premiums each year. But it also means that, if you’re disabled, your entire disability benefits check is available to help pay the bills!

4. Life Insurance

Life insurance is an essential component of a good finan-cial plan. It protects survivors of the insured against finan-cial loss in the event of death. But many PCA churches fail to recognize that life insurance also protects their church! Most congregations are unable to provide long term finan-cial assistance for widows and their families. Why subject your church to undue risk, especially when life insurance is so inexpensive? Providing life insurance for ministers is a cost-effective way to manage your risk and a good way to care for your minister and his family.

There are many types of life insurance products available, but the most cost-effective type is term life insurance. Term life policies, on average, are cheaper because, unlike cash value (whole, variable, universal life insurance, etc…), no part of the premium is used for investment pur-poses. Term life insurance has another benefit. The first $50,000 of church-paid term group life insurance cover-age is tax-free. However, cash value life insurance premi-ums paid for by an employer are entirely taxable.

RBI currently provides a number of group life insurance and accidental death & dismemberment products for ministers, spouses and children. Determining how much life insurance a minister needs is a multi-factor decision that is best determined on an individual basis. We encourage PCA churches and ministers to contact us if they need assistance in determining how much life insurance is needed.

5. Home Equity Allowance

A Home Equity Allowance is not another term for the Minister’s Housing Allowance. It is a benefit designed for ministers living in a church-owned manse.

Most ministers who live in a church-owned manse are unable to continue living in that manse in retirement.

Therefore, it is important for ministers living in church-owned housing to save additional resources for their housing needs in retirement. It is also important for PCA churches to recognize that ministers living in a church- owned manse cannot accumulate home equity since they do not own a home. PCA churches are encouraged to provide a home equity allowance that will help ministers secure a home in the future.

PCA churches should establish a written plan that includes a calculation and establishes a funding plan. One method would be to create a calculation based on the manse’s home value and its increase in value during the past year(s), or based on the U.S. median home price and the percentage increase in the national home value using well recognized services like the Fiserv Case Shiller and the S&P Case Shiller U.S. National Home Price Index.

The following are examples of the calculation.

Annual Change in Value Home Amount Equity

Allowance

Manse: 1.5% X Manse’s Home

Price: $215,000 = $3,225.00

National Average: 2.1% X Median Home

Price: $177,000 = $3,717.00

The optimum method of funding a home equity allow-ance is a decision best made in consultation with a quali-fied tax professional. However, for tax purposes, a home equity allowance is taxable both for income and Social Security tax purposes unless the contribution is directed to a 403(b) or similar retirement plan.

6. Social Security and Medicare Allowance

Generally, ministers serving in PCA churches have a dual tax status. This means that the IRS considers them employees for federal income tax purposes (they receive a W-2), and self-employed for Social Security and Medicare tax purposes (they file a Schedule SE with their personal return). Unlike lay church employees, ministers must pay into a different Social Security and Medicare program (SECA), which requires them to pay the full 15.3% on their cash salary and housing allowance (or fair market rental value of the manse).

17


Many PCA churches would like to defray their ministers’ expenses by paying the equivalent of the employer por-tion of the Social Security and Medicare program to the IRS. Regrettably, churches cannot directly pay FICA taxes on their ministers’ behalf. However, PCA churches are permitted to give an allowance that offsets some or all of the Social Security and Medicare taxes.

PCA churches are encouraged to pay ministers who have remained in Social Security a special allowance on in-come of $127,200 or less in 2017 that provides for 7.65% of their salary, housing allowance, and other tax-able benefits (including this allowance), just as they are required to do for lay church employees. The difference is that the amount should be paid directly to the minister. The allowance must be considered taxable income, and must be included with wages in Box 1 of the minister’s W-2 form, and reported on the minister’s tax return.

Those who have opted-out of Social Security have enor-mous savings needs. Churches with ministers who have opted-out of Social Security might consider contributing this same amount to their minister’s retirement plan if they are concerned about their minister’s retirement readiness.

7. Counseling and Coaching for Ministers

There are many roles, e.g. Shepherd, Preacher, Teacher, Evangelist, Administrator, etc., that PCA ministers perform in the course of their labor. One of those roles is the high calling to preach the word of God. Each Sunday, many PCA Ministers stand at the front of the congregation, and preach God’s redemptive plan for mankind with great boldness. It is easy for members of the congregation to equate the minister with the authoritative and infallible message he is preaching. It is easy for the church to wrongly place their minister on a pedestal and think his sanctification is complete.

The reality is that ministers have the same des-perate need of Christ’s transforming grace in their lives as other members of their church. Therefore it is important that churches remem-ber that ministers need to be ministered to as well. Regrettably this is an area where many churches fall short. Because churches recog-nize the need to help their members grow in grace, there are a number of resources and

ministries geared towards the pastoral care and spiritual growth of the congregation. All too frequently though, there are few (if any) resources established for the on-going spiritual vitality of their ministers.

What is your church doing to minister to your Shepherd(s)? Should your Teaching Elder(s) receive less of the pastoral ministry of the Body of Christ than the rest of the congre-gation? Clearly not, especially when you consider the vital role of a minister within a church.

For this reason, leadership within PCA churches should consider having a plan in place to support a minister’s spiritual development. Part of that plan may include bud-geting resources for counseling and/or coaching for all the ministers in your church. Optimally, this is not de-signed to be a one time benefit, but an annual resource during the entire duration of a teaching elder’s ministry. This resource will help not only ministers, but it will also benefit the congregation.

PCA Retirement and Benefits, Inc.’s Ministerial Relief is growing a Christian counseling ministry for PCA teach-ing elders and their wives. The ministry, ServantCare, is designed to be an affordable, convenient and confi-dential shepherding resource for PCA’s presbyteries and their teaching elder members. If this resource is available through your presbytery, your church should encourage its pastoral staff to join this program. If this program is not available in your presbytery, then the following steps should be considered to make sure each pastor and his wife are receiving the ongoing care needed to minister effectively to your congregation.

18


• Establish a counseling/coaching reimbursement program that may be accessed by both your pastor and his wife.

• Make your program affordable: Make the first three sessions for him or his wife fully reimbursable and par-tially reimbursable for the next four sessions. Please keep in mind that these reimbursable amounts must be included in your pastor’s W-2.

• Make your program confidential: Church leaders should understand that your program will not be utilized without strict confidentiality. Church leadership should establish confidentiality policies that protect the privacy of your pastor and his wife.

Secondary Benefits

8. Cafeteria Plan (Section 125)

One of the most underused benefit plans is the Cafeteria Plan which is outlined in section 125 of the US tax code. This plan allows a minister to withhold a portion of his pre-tax salary to cover certain medical or child-care ex-penses with the understanding that if he does not use those amounts for those purposes by the early part of the following year, he will lose them. Because these benefits are free from federal and state income taxes, a minister’s

taxable income is reduced. The savings can be meaning-ful to ministers paying 15.3% in SECA taxes, but because of the compliance issues including a requirement for a written plan document, and the significant recordkeeping involved, we would recommend that you hire a profes-sional cafeteria plan provider to oversee your plan and administrate accounts and reimbursements.

9. Other Important Benefit Plans

• Dental—These policies provide essential dental care such as exams, cleanings and fillings. RBI currently provides one individual and two group dental plans for ministers and their families.

• Vision—This type of insurance pays for comprehen-sive eye examinations and helps to offset the cost of corrective lenses. Eye examinations are recommended every five years for individuals between the ages of 20 and 40. Those over 40 should have an eye ex-amination every two years. RBI currently provides one group and one individual vision plan for ministers and their families.

• Long-Term Care— These types of policies help those with chronic illnesses and disabilities function on a day-to-day basis. Neither Medicare nor em-ployer provided health insurance pays for long-term care services for an extended period of time. If you

are a minister age 50 or older, you should inves-tigate the benefits of long-term care insurance.

Vacation, Leaves of Absence, SabbaticalThe pastorate is a unique calling that comes with unusual hours. Ministers do not work a five-day workweek as many lay people do. They work most weekends and often evenings as well. This means they have

limited time on evenings and weekends to spend with their families. Scheduled time with family can often be interrupt-ed by congregational emer-gencies, such as a church member’s death or illness. Due to the 24/7 nature of a

19


minister’s calling, it is vitally important that ministers have sufficient periods of time off for rest, recuperation and uninterrupted quality time with their families.

PCA churches are encouraged to provide at least four weeks of paid time off from work (including Sundays) for vacation and most leaves of absence with the excep-tion of educational leave. Churches should work closely with ministers to determine appropriate scheduling for ministers continuing their education or for those taking a sabbatical.

1. VacationIt is appropriate to look at a vacation policy as part of the annual compensation review. One thing to con-sider when offering vacation is the minister’s total num-ber of years of dedicated service, not just his length of service to the current congregation.

2. Leaves of AbsenceListed below are four types of leaves of absence.

• Sick Leave—Time away from church should be provided for illness and medical treatment in a hospital.In cases of prolonged illness or injury, a church’s short term disability provisions will provide care for the minister.

• Paternity Leave—Fathers who are blessed with a new child through birth or adoption are encouraged to be at home to strengthen familial ties.

• Funeral Leave—Time away should be provided to a minister to attend the funeral of an immediate family member (i.e. spouse, children, sibling, or parent).

• Educational Leave—Continuing education and profes-sional development are necessary for carrying out the work of the ministry. This may require periods of edu-cational leave from one to two weeks annually. This will be of value not only to the minister but also to his church. Ministers interested in pursuing continuing education should develop a plan with the assistance of their Sessions.

3. Sabbatical LeaveThe gospel ministry is a high calling. But it is also a highly intense and demanding career. There are a num-ber of battles, difficulties, and temptations that are either

“unique to or intensified by pastoral ministry” (Paul Tripp, Dangerous Calling). In many ways, pastoral ministry has become an increasingly difficult vocation. Surveys and statistics from all over the theological landscape report the same truths—ministers are leaving the ministry in droves. Many leave because of discouragement and frustration over critics, conflict, burnout, financial strug-gles, family issues, and moral failure. At their core, all of these issues are issues of the heart. External trials and opposition abound, but pastoral ministry is by nature a continuous battle fought on the soil of the heart!

God continues to call men to serve Him enthusiastically and tirelessly in the spiritual warfare of pastoral ministry.

This “dangerous calling” is both invigorating and exhaust-ing. And it is easy to lose sight of biblical priorities, per-spective, joy and zeal. No minister is immune from these struggles. For this reason, all who have been engaged in battle need rest from time to time. This need for renewal is embodied in the concept of a Sabbatical leave.

In accordance with the biblical principal of rest and re-freshment exemplified in the Sabbath, a Sabbatical leave might be defined as an extended time of paid planned rest and renewal during which a minister seeks personal and professional enrichment. Sabbatical leaves should be spent in rest, reading, study, and/or in other activities or ministries prayerfully designed to refresh and encour-age a minister in his walk with Christ.

Many arguments could be advanced for and against this extended leave. But the testimonies of ministers who have benefited from them, and the churches who have pro-vided them as part of their overall ministry to and care

One thing to consider when offering vacation is the minister’s total number of years of dedicated service, not just his length of service to the current congregation.


for their pastor, are strikingly similar. Many ministers have returned to their congregations with renewed energy, spiritual vision, and revitalized effectiveness.

Churches should establish policies to govern Sabbatical leaves (a sample policy can be found on page 51). Those policies ought to address which ministerial staff are eligible after a certain number of years and what kind of advanced planning is required. Churches should clearly define the process of submitting an acceptable written Sabbatical leave proposal—including deadlines and potential expenses involved (e.g. additional pulpit supply costs, agreed upon travel expenses. etc.). It is recommended that Sabbatical leave proposals be submitted no less than 3 months in advance, and where possible prior to the preparation of the annual budget. Sabbatical leaves should not be counted as vacation leave—though they could be taken concurrently if mutually agreeable.

Reimbursable ExpensesTraditionally, some churches have included expense reimbursements as part of the call package. We recommend that all churches discontinue this practice. Instead, all PCA churches should agree to a maximum amount of reasonable and necessary business expenses to be reimbursed each year (a sample account-able reimbursement policy and form can be found on pages 53 and 54). These expenses should be included in the church budget completely separate from the minis-ter’s compensation. For this reason, before the beginning of each year, the minister should carefully estimate the amount of expenses he will incur over the course of the year. The Session should evaluate and approve or revise this amount in the church budget as the maximum expense reimbursement for the upcoming year. Please note if at the end of the year there remains money in the reimbursement account, that amount will revert back to the church, and cannot be paid to the minister as additional non-taxable compensation (e.g. bonus, extra salary, etc.).

Before a church can reimburse expenses, an account-able reimbursement plan must be created and it should be tax code compliant (see IRS Publication 1828, “Tax Guide for Churches and Religious Organizations”). This

plan would require ministers to submit reimbursement requests for mileage and submit receipts for such things as books, business lunches, etc. in a timely manner (with-in 60 days after the expenditure). If the minister receives a monthly allowance he would need to submit documen-tation for its use for business purposes within 120 days and return any unused funds. Payments made to ministers pursuant to an accountable reimbursement plan can be excluded from taxable income. However, if the minister receives a monthly allowance from the church and sub-mits no documented evidence of the expenses (an unac-countable plan), the amount must be included as part of his taxable income.

By way of reminder, reasonable and necessary ex-penses (e.g. travel, lodging, meals, registration fees, etc.) incurred by attending and traveling to and from Presbytery and General Assembly meetings are to be paid by PCA churches and PCA related organizations. These expenses may be reimbursed, billed, or simply paid in advance by the church, but they are not to be considered discretionary. These costs are to be paid by the church whether an accountable reimbursement plan is established or not. (BCO 10-6)

20

1. Ministry Related Expenses

2. Travel Expenses

3. Hospitality Expenses

4. Personal Vehicle Expenses

5. Educational Expenses

Suggested categories for accountable expenses:

21


These guidelines serve as a tool to help our PCA min-isters, churches and Presbyteries create equitable call packages. This document was created to apprise you of a number of challenges and assist you in formulating solutions. Items mentioned under this section are not part of the traditional call package, but have been included to remind you about important information related to employee benefits.

Small Churches

We recognize that there will be a number of high hurdles for some churches to cross, particularly smaller PCA churches, church plants and missions. Many of these organizations have limited resources and annu-ally struggle to keep afloat. These churches play a vital role in Christ’s Kingdom and would welcome the op-portunity to better compensate their staff. Regrettably, there are not enough resources to cover all the minis-tries of the church.

Most of our ministers recognize these limitations and have answered Christ’s calling to serve in these churches.

However, provisions must be made to allow them to adequately provide for themselves and their families. One solution is to change the expectations that con-gregations have of ministers. If a church is unable to adequately compensate their minister, acknowledging this challenge is the first important step. If a church calls a full-time minister, it is obligated to adequately com-pensate the minister for full-time employment.

An equally important second step is developing a plan that will permit a minister to adequately provide for him-self and his family. Three alternatives are listed below.

1. Reduce the minister’s workload to the essentials of ministry (i.e. work that cannot be carried out by church members) and call a bi-vocational, partially retired, or part-time minister.

2. Partner with other small churches in your area to call a minister that will serve in multiple congregations.

3. Develop a plan to adequately compensate your minister within a reasonable amount of time (e.g. 1– 5 year plan).

Social Security — Important considerations

Every newly ordained minister in the PCA faces a dif-ficult decision about his compensation structure. It is a choice that has significant personal ramifications. The decision regarding whether or not to opt out of Social Security is supposed to be based solely on a religion-based personal opposition to the acceptance of Social Security benefits. For the minister who opts out of Social Security, the need to adopt conservative budgeting practices becomes paramount.

Ministers who remain in Social Security will ultimately qualify for the following important benefits:

• Retirement benefits payable to a fully-insured person.

• Survivor benefits payable to the surviving spouse or dependent children of a deceased worker.

• Disability benefits payable to a permanently disabled worker and his dependent children under 19 years of age.

• Medical and hospital benefits payable at age 65 (the Medicare program).

OTHER CONSIDERATIONS

The decision whether or not to opt out of Social Security is supposed to be based solely on a religion-based personal opposition to the accep-tance of Social Security benefits.

22


This section of the PCA Call Package Guidelines will at-tempt to address this very complex topic and provide guidelines based on the experiences of ministers within the PCA.

First, let’s review some basic information about this impor-tant topic. The payment of Social Security and Medicare taxes is typically split evenly between the employer and non-ministerial employee. The tax rate of 15.3% of an em-ployee’s wages is paid, with the employer paying 7.65% and the employee paying 7.65%. However, ministers are considered self-employed for Social Security purposes. So, instead of paying just the employee’s portion of the Social Security tax, ministers pay a self-employment tax on their salary and housing allowance equal to the entire 15.3%.Sadly, this self-employment tax feature is not widely understood by most church members or their leaders.

Ministers may apply for exemption from self-employment taxes (opt out of Social Security) with respect to their min-isterial earnings if several conditions are met. The require-ments are:

• The minister must be an ordained, commissioned, or a licensed minister of a church.

• The church or denomination that ordained, commis-sioned, or licensed the minister is a tax-exempt reli-gious organization.

• The minister must file an application in triplicate with the IRS. (IRS Form 4361). On the application, the minister must attest to the fact that he is “conscien-tiously opposed to, or because of his religious prin-ciples is opposed to the acceptance (with respect to services performed by him as a minister) of any public insurance that makes payments in the event of death, disability, old age, or retirement, or that makes payments toward the cost of, or provides ser-vices for, medical care.”

— Notice that opposition “to the acceptance of public insurance” is the ONLY legitimate basis for signing the form and opting out.

— In other words, he must be opposed on the basis of religious considerations to the acceptance of Social Security benefits—not in opposition to the payment of the tax, or any other economic reasons.

• The exemption application (IRS Form 4361) must be filed on time. The deadline is the due date of the fed-eral tax return for the second year in which a minister has net earnings from self-employment of $400 or more, any part of which is derived from the perfor-mance of services in the exercise of ministry.

• By law, the ordaining, commissioning, or licensing church or denomination must be notified. (Therefore, under PCA church polity, this view and decision must be made known to Presbytery.)

• IRS verification and approval is required. No applica-tion for exemption is approved unless the IRS “has verified that the individual applying for the exemption is aware of the grounds on which the individual may receive an exemption, and that the individual seeks an exemption on such grounds.” Ministers seeking the self-employment exemption must certify they have read the statement and agree on the grounds listed in the statement under penalties of perjury. Once com-pleted, the exemption is irrevocable.

It is very important that ministers who are considering opt-ing out of Social Security carefully consider their reasons for such a decision. Many potential reasons given for opt-ing out of Social Security would, in fact, contradict the plain meaning of the tax code. Some examples would be:

23


• I can’t afford to pay the self-employment tax.

• If I opt out of Social Security I will get an effective increase in my compensation.

• Social Security won’t be around by the time I retire.

• My financial advisor told me to opt out.

• I can invest that money better.

• Any other economic or nonreligious consideration.

Ministers who opt out should understand that their religion based opposition to Social Security cannot be base on opposition to the the payment of Social Security taxes. Instead, a minister must be “conscientiously opposed to, or because of his religious principles is opposed to the acceptance (with respect to services performed by him as such minister) of any public insurance that makes pay-ments in the event of death, disability, old age, or retire-ment, or that makes payments toward the cost of, or pro-vides services for, medical care.” The two key words in this statement are acceptance and any. A minister must be religiously opposed to the acceptance of these benefits and further opposed to the acceptance of any public insur-ance benefits for theological reasons.

Those ministers who opt out of Social Security face an enormous challenge to save sufficiently to replace the val-ue of renounced Social Security benefits. They will need to have at least an additional $500,000 in retirement sav-ings compared to ministers who remain in Social Security. And that amount does not include the impact of the loss of Medicare (health insurance benefits) in the years when healthcare expenses are the highest. The RBI-sponsored PCA Retirement Readiness Survey revealed that ministers who have opted out of Social Security are not saving suf-ficiently to replace these important benefits.

Given the extraordinary good faith claim required for ex-emption from Social Security, few ministers would qualify for this exemption. But because of substantial economic temptation, PCA churches who want to encourage their ministers to remain in Social Security should include in a minister’s compensation a reimbursement for one-half of the minister’s self-employment tax. (Churches should not, however, withhold or make FICA payments since this re-porting is incorrect. See Social Security section p.16-17.)

Ministers’ Dual Tax StatusMost PCA ministers who labor in a church or related Chris-tian ministry have a dual tax status. They are treated as employees for income tax purposes and as self-employed for Social Security and Medicare (self-employment) tax purposes (SECA). Churches should consider ministers as employees for income tax purposes and issue them a W-2. Additionally, ministers must file a schedule SE to pay for self-employment tax. Many churches do not understand the uniqueness of a minister’s tax status nor do they understand the implications of a minister’s dual tax status.

This year, most lay church members will contribute 7.65% of their salary in FICA taxes towards Social Security and Medicare, while ministers will be held responsible for 15.3% in SECA taxes. This is equivalent to the employee (7.65%) and employer portion (7.65%) of FICA taxes. This large tax burden doesn’t apply to all church workers, just ordained ministers.

Ministers’ Options in Paying TaxesChurches and church-related organizations are not required to withhold taxes from their minister’s compensation. It is the minister who is responsible for remitting his taxes to the IRS on a quarterly basis. However, many churches choose to assist their ministers by withholding and depositing those taxes on their minister’s behalf.

Churches and church-related organization should not with-hold FICA taxes for their ministers. Rather a minister should estimate their tax liability (e.g. income tax and self-employ-ment tax) and enter the amount to be withheld from each paycheck on line 6 of a W-4 form. This form should be given to the person in charge of payroll.

PCA churches who want to encourage their ministers to remain in Social Security should include in a minister’s compensation a reimburse-ment for one-half of the minister’s self-employment tax.

24


Ministers can choose between two options to remit their payment. They can choose to submit quarterly estimated payments (April, June, September and January) to the US Treasury using Form 1040-ES. If their church is willing, ministers can also calculate the amount of estimated tax they owe and request their employer to withhold a set amount on a regular basis. The employer would then re-mit the taxes along with their regular payroll tax deposits using IRS form 941. These payments should be reported on the minister’s W-2 as Federal income tax withheld.

Challenges in Preparing Ministers’ ReturnsBecause of the dual tax status of ministers, as de-tailed above, and the way that taxable income and tax withholdings are reported on the W-2, (i.e. only the taxable salary portion of compensation is report-ed in box 1 and no amounts reported in boxes 3–6) many tax preparers, including some CPAs, do not know how to properly prepare a minister’s tax return.

Common errors include:

1. Assuming that since a minister is self-employed for Social Security and Medicare tax purposes he is self-employed for income tax purposes and report-ing his salary on a Schedule C.

2. Assuming that, since no amounts are reported in boxes 3-6 of the W-2, none of the minister’s com-pensation is subject to self-employment tax and not filing a Schedule SE, thereby not paying the self-employment tax. (Ministers who timely filed a Form 4361 and opted out of Social Security do not have to file a Schedule SE and pay the self-employment tax on their ministerial income.)

3. Reporting on Schedule SE only the amount shown in box 1 of the W-2 and not including the housing allowance, thereby under-reporting and under-paying self-employment tax.

Due to these errors and others, RBI annually produces and distributes the Tax Preparation Guide including the Federal Reporting Requirement for Churches. This docu-ment is specifically designed for ministers and church administrators to assist with federal reporting, tax plan-ning and income tax returns. This year, PCA Retirement & Benefits, Inc. is providing a link to an electronic copy of the 2017 Edition of Ministers’ Taxes Made Easy – Federal, State and Other Reporting Made Easy and the 2017 Edition of Church Reporting Made Easy – Federal, State and Other Reporting Made Easy. The tax preparation and church reporting guides are pre-pared by Dan Busby, CPA and friends. Mr. Busby is the president of ECFA, an organization that accredits Christ-centered ministries in the areas of governance, financial management, and stewardship/fundraising. Dan also has over 40 years of experience serving churches and the nonprofit community and frequently speaks nationally on related issues.

Some of you will note a change in the title and authors of our tax and church reporting guides. While many tax professionals appreciated the thoroughness of our former tax guide, some of our ministers argued that it was not easy to follow. That is one of the key benefits of the 2017 Edition of Ministers’ Taxes Made Easy and Church Reporting Made Easy. They are written in easy-

25


to-understand language for non-accountants. And yet, are also thorough enough to help tax preparers who assist ministers in completing their taxes and church ad-ministrators in complying with regulations.

Separation from ServiceThe Federal Unemployment Tax Act (FUTA) provides a safety net to most former employees who were discharged for acts other than serious misconduct. In general, benefits will be awarded to former employees who are laid off or discharged for minor misconduct (e.g. incompetence). The award amount for unemployment insurance benefits is almost half of an employee’s former earnings. The award amount could be more if the employee is married or has dependents.

Most church employees do not have this type of protec-tion. Section 3309 of the FUTA enables most churches and church-related organizations to opt out of the State Unemployment Tax System (SUTA). While it is possible for a church to voluntarily elect into the unemployment insurance system, most do not. PCA churches and church-related organizations should remember former employees are not covered under unemployment insurance, and are encouraged to factor this disadvantage into severance package decisions for former employees, including non-ministerial employees.

Workers’ Compensation InsuranceMany churches and church-related organizations assume they are exempt from Workers’ Compensation laws, although frequently that is not the case. Workers’ Com-pensation laws exist in all fifty states and the majority of states do not provide churches with specific exemp-tions of Workers’ Compensation benefits. If your church or church-related organization is located in a state that requires Workers’ Compensation, you should carefully research applicable state laws to determine your options. A prudent course of action would involve the purchase of Workers’ Compensation insurance for your employees and possibly volunteer workers as well.


26

Churches and church-related organizations that have legal exemption from purchasing Workers’ Compensa-tion should critically evaluate their ability to pay a large multiyear claim on an injured employee. A serious on-the-job injury would financially overburden most small and midsize churches. If your church is eligible and consider-ing self-insurance, it is best to seek professional counsel in assessing your risks.

The PCA Ministerial Relief MinistryThe PCA Ministerial Relief Fund was established at the first General Assembly to provide finan-cial assistance to retired or disabled minis-ters and their widows with acute financial needs. These needs are typically caused by serious medical conditions that prevent a family from adequately saving for retirement, catastrophic loss due to an accident or death, or, most often, widows in their 80s and 90s who have outlived their retirement savings. Without this assistance, these church servants would be living in or near poverty.

The Ministerial Relief Fund provides assis-tance only when their family and church can-not assist them sufficiently to meet the basic needs of life. It is not able to provide the level of assistance that would replace a significant portion of pre-retirement income. Therefore,

it should not be considered as a practical alternative to a well-funded retirement plan.

While most ministers will be able to fund their retirement plan, we know that some will be unable to achieve a sufficient level of savings to meet their needs. Death or dis-ability will prevent some from meeting their savings goals as well. We will always need the PCA Ministerial Relief Fund to provide this vital assistance.

The Ministerial Relief Fund is primarily funded through do-nations by churches and individuals giving to the annual PCA Ministerial Relief Christmas Offering. Participation in this offering is an important part of any church’s plan to provide for our retired ministers and especially their wid-ows. RBI currently provides free bulletin inserts, offering envelopes, and other materials to churches who desire to participate. They may be ordered by contacting the RBI Ministerial Relief office.

When a PCA pastor leaves a church or ministry it may be some time before he finds or begins a call to a new church. During this transition, he may not be able to afford health insurance premiums for his family. PCA Ministerial Relief can provide up to three months of Health Insurance Assistance to enable the family to retain coverage. More information is available on the PCA RBI website under Ministerial Relief.

Many churches and church- related organizations assume

they are exempt from Workers’ Compensation laws, although

frequently that is not the case.


27

GROSS SALARY

SalarySetting appropriate compensation levels for ministers is best handled by local church Sessions and Pres-byteries in conjunction with their ministers. There are a number of factors churches should consider when creating the salary component of a call package, including the needs of minister and his family, the minister’s education and experience, the income of other local professionals with similar responsibilities, the financial condition of the church, and the respon-sibilities of the position. The process can be chal-lenging, but it is a necessary step for every church calling a minister. Guiding principles can be found on page 7 of this document.

Housing AllowanceOrdained and licensed PCA ministers who live in a church-owned manse, rent a home, or own a home may be eligible to receive a housing allowance. With this benefit, a minister can exclude a portion of his Gross Salary as a housing allowance under Section 107 of the Internal Revenue Code. Minis-ters should estimate liberally in the calculation of their housing allowances, and Sessions should be generous in their designations. After all, ministers should be allowed to maximize their use of this important benefit.

BENEFITSHealthcarePCA Churches are encouraged to provide a minister and his family with health care coverage or a suf-ficient salary that would enable him to purchase af-fordable individual health insurance. Churches who do not provide full family health insurance coverage, should be sensitive to the restraint that added health-

care expense will place on a minister’s budget. Re-member, failure to carry adequate health insurance coverage can be financially catastrophic to all par-ties involved. We would strongly encourage you to seek professional legal and tax advice on your spe-cific situation.

Retirement SavingsPCA churches and ministers are encouraged to con-tribute a sum that totals between 10% to 15% of the minister’s annual salary plus housing allowance. It is wise to designate retirement contributions as a per-centage of salary rather than a fixed dollar amount. This will allow contributions to keep pace with salary increases without having to complete a new salary reduction agreement.

Short & Long Term Disability InsurancePCA churches are encouraged to provide a Long Term Disability Plan that replaces at least 60% of income.

Life InsurancePCA churches are encouraged to provide a Term Life Insurance Plan. Determining how much life insurance a minister needs is a multi-factor decision that is best determined on an individual basis. PCA churches and ministers should contact RBI if they need assistance in determining how much life insurance is needed.

Home Equity AllowanceGiven that a manse is an asset of the church, there is a need to enable a minister who lives in a manse the ability to accumulate equity that can eventually be used to provide housing. Therefore, PCA churches should establish a written plan that includes a calcula-tion and a funding plan. Guiding principles can be found on page 16 of this document. If you choose not to provide a Home Equity Allowance, then you should increase your minister’s retirement plan contri-

RECOMMENDATION SUMMARY


28

DisclaimerThe PCA Call Package Recommendation Summary is provided for ease of reference and is a brief summary of the elements of a proper call package. It is recommended that you review the “Elements of the PCA Call Package Guidelines” in its entirety to get a more complete description of the benefits and their correct use within a call package.

butions to cover house payments in retirement.

Social Security and Medicare AllowancePCA churches are encouraged to pay ministers who have remained in Social Security a special allowance, on income less than or equal to $127,200 in 2017, that provides for 7.65% of their salary, as it must do for lay church employees through the Employer portion of FICA taxes. This amount should be paid directly to the minister instead of through payroll taxes. Additionally, the allowance must be considered taxable income and must be included with wages in Box 1 of the minister’s W-2 form, and reported on the minister’s tax return.

Counseling/CoachingPCA churches are encouraged to participate in the denominational counseling service called ServantCare. ServantCare provides confidential, affordable and accessible counseling for Teach-ing elders and their spouse. This benefit, entered in through your presbytery, costs $5 a month per Teaching Elder or $10 per couple per month.

VACATION AND LEAVES OF ABSENCEPCA churches are encouraged to provide at least four weeks of paid time off from work (including Sundays) for vacation and most leaves of absence with the ex-ception of educational leave. Churches should work closely with ministers to determine appropriate schedul-ing of time off for ministers continuing their education.

Examples of leaves of absence:

• Sick Leave• Paternity Leave• Funeral Leave• Educational Leave

REIMBURSABLE EXPENSESTraditionally, some PCA churches have included ex-pense reimbursements as part of the call package. We recommend that all churches discontinue this practice. Instead all PCA churches should set up an Accountable Reimbursement Plan and agree to a max-imum amount of reasonable and necessary business expenses to be reimbursed each year. These expenses should be included in the church budget completely separate from the minister’s compensation.

Examples of reimbursable expenses:

• Business use of a car, up to the current IRS standard mileage rate

• Business-related travel away from home: transportation, meals, parking, lodging and tolls on overnight trips

• Expenses for meetings including General Assembly, Presbytery meetings, conferences and workshops

• Expenses for continuing education including tuition and books

• Subscriptions to journals and magazines, books and software related to the ministry

• Entertainment expenses related to the ministry

• Computers and cellphones if used for the convenience of the church and not the minister, and as a condition of employment for the minister.

29


Presbytery Implementation Resources Addendum

On the following pages you will find these resources to assist you in

implementing the PCA Call Package Guidelines in your Presbytery:

R Letter to Presbyters

R Procedures for Implementing the PCA

Call Package Guidelines in your Presbytery

R Sample ‘Policy’ Motion

R Sample ‘Letter to Churches’ — Informing and

Explaining the Reasons for the Policy

R Call Package Evaluation and Review Worksheet

31

PRESBytERy ImPlEmENtAtIoN RESoURCES

PRESBYTERY IMPLEMENTATION

31

The need for Presbytery implementation of the PCA Call Package Guidelines is a very serious matter. In 2010, PCA Retirement & Benefits, Inc. (RBI) spon-sored a PricewaterhouseCoopers denomination-wide survey of Teaching Elders to determine their ‘retirement readiness.’ As you may have heard, the results of that survey were alarming! The survey revealed an approaching tide of financially unpre-pared retirees. The study also projected that their overwhelming financial needs would deplete the PCA Relief Fund by 2029. When commenting on the PCA’s current compensation practices, one astute observer remarked: “We have a system that is in-creasingly producing impoverished widows.” He is right; and this is both egregious and shameful.

Sadly, the call package recommendations made by our PCA founding fathers in 1973 (GA Minutes, 1973 p.49), were not widely implemented because most Presbyteries had no policies regarding call packages, or were completely unaware of those recommendations. Today, though most ministers un-der the oversight of PCA Committees and Agencies have both reasonable salaries and sufficient benefits, many under Presbytery oversight do not. Sadly, many Presbyteries continue to routinely approve in-sufficient and unintentionally misleading ‘lump-sum’ call packages that jeopardize the financial welfare of our pastors and their families. By God’s grace, this must change.

In 2011, the PCA General Assembly (GA) respond-ed to the ‘retirement readiness’ survey by directing RBI to develop ‘call package guidelines’ to assist Pas-tors, Sessions, and Presbyteries in developing and evaluating ministerial call packages. In that same

year, RBI published the PCA Call Package Guide-lines, and the 2012 GA strongly “exhorted Presbyter-ies and member churches to implement them.”

That’s why we are including these resources in the PCA Call Package Guidelines. We do not believe that these Guidelines will be implemented, even with GA’s strong exhortation, unless men in our Presbyter-ies rise up and appeal to their fathers and brothers to make the use of these guidelines a matter of policy in their Presbyteries.

To assist you in your efforts to follow GA’s ‘exhortation to implement’ these Guidelines, RBI has developed the following helpful resources. We have developed a list of Committee ‘implementation procedures,’ a sample ‘motion’ to help you create a policy, a sample ‘letter to churches’ communicating your new policy decision, and an evaluation ‘checklist’ that can be utilized in reviewing call packages. These resources are attached, and digital copies are avail-able in a downloadable and customizable format on www.pcarbi.org so that you can adopt, adapt, or alter them in any way your Presbytery desires. Just go to our website and using your mouse, hover over ‘Resources,’ click on ‘RBI Publications,’ and then se-lect ‘Presbytery Documents’ under Call Package Re-sources.

Thank you for your serious consideration of this mat-ter, and for your assistance and leadership in your Presbytery. Please read and examine the following materials. And if we can be of any assistance to you, please do not hesitate to call: Dave Anderegg [x1296], Ed Dunnington [x1196], or Mark Melen-dez [x1274], at (800)789-8765.

32


Suggested Presbytery Call Package Guidelines Implementation Procedures

I. Call Package Guidelines (CPG’s) ‘Policy’ Implementation:

■ Committee Assignment: A member (or members) of each Presbytery should request that these Guidelines be assigned to an appropriate Committee for action. (Perhaps one specifically tasked with Pastoral care & oversight, or examinations.)

➤ If no Committee is willing to bring a motion, then any member of Presbytery could make the motion on the floor of Presbytery. A second would be required.

■ Committee Deliberation: (if assigned to a Committee)

■ Clearly communicate the reasons why establishing a Presbytery ‘policy’ is important. (You might note the reasons attached to the sample policy motion addendum…)

➤ Creating a Presbytery ‘policy’ establishes a standard, helps prevent the CPG’s from being ignored or forgotten, and creates the ‘expectation’ that pastoral calls should be developed and presented according to the CPG’s. This expectation should significantly reduce the potential for future misunderstandings, and unnecessary confrontations.

■ Allot sufficient time for Committee reflection, discussion, and prayer.

■ Sample Motion: “That _________ Presbytery hereby adopt and implement the PCA Call Pack-age Guidelines as its official policy regarding the acceptable form of Call Packages. Every Call Pack-age presented to Presbytery must reflect interaction with these Guidelines by breaking-out separate, specific, and sufficient amounts for Salary; Housing Allowance; Retirement Savings (stated as a per-centage of Salary plus Housing Allowance); Health, Life, and Long-Term Disability Insurance benefits; Moving Expenses; and Vacation benefits.”

■ This motion, or one similar to it, would only prescribe thoughtful interaction with the CPG’s, and a mathematical break-out of the components.

■ This would not prescribe ‘salary levels,’ but clarify the amount of the pastor’s net salary, and clarify whether necessary and sufficient benefits were also being provided.

■ And, this would not prevent the presentation of ‘non-conforming’ call packages, as long as reasonable and thoughtfully considered explanations are provided.

33


■ Making a motion: A Committee would first make a motion (M/S/C) to recommend to Pres-bytery the use of the “PCA Call Package Guidelines” as an official policy of the Presbytery. Once passed in Committee, the Committee would then bring this motion to the floor of Presbytery where it would be communicated as an official ‘Recommendation’ of the Committee.

■ Communication: Once passed, the Committee or Presbytery should consider sending an of-ficial communication of this ‘policy’ to all the member churches of Presbytery. The mailing or commu-nication should: (see attached CPG addendum ‘Letter to Churches’ for an example)

■ Inform each Session of the decision to implement this new policy, and communicate that ‘lump-sum’ packages will no longer be approved.

■ Explain the reasoning behind the policy decision, including the significance of the PCA retirement-readiness crisis, the value of a policy, and the 2012 PCA General Assembly’s ’exhortation to implement’ the CPG’s.

■ Provide each church with a copy of the CPG’s, or a link to the CPG’s on the PCA AC or PCA RBI website.

■ Encourage each Session to examine, evaluate, and make changes to their existing ministe-rial call package(s) in light of the CPG’s.

II. Ongoing Implementation of the Call Packages Guidelines (CPG’s):

■ Responsibility: The Presbytery should assign responsibility for ongoing implementation and administration to a Committee. A Committee could assign that responsibility to a member. Responsi-bilities would include providing resource availability and policy communication, Call Package devel-opment assistance and evaluation, and a genuine concern for the financial wellbeing of pastors and their wives.

■ Communication/Resources/Assistance:

■ Make sure that current PCA CPG’s are readily available to all churches.

➤ Current copies of the CPG’s, or a link to the CPG’s should be maintained on the Presbytery website. (current digital copies are available at www.pcarbi.org)

■ With humility, kindness, patience and understanding, Committees should work graciously and closely with churches developing Call Packages to provide assistance.

■ Committees should also make known to all interested parties the available assistance and resources at RBI.

34


■ Call Package Examinations/Approvals:

■ As early as possible, enter into a Call Package development conversation with a church planning to issue a call. You might ask:

— Do you have a current copy of the PCA Call Package Guidelines?

— Do you plan to include necessary benefits, and have you calculated their cost?

— Have you developed a budget (or will you ask the candidate to develop a budget) that is reflec-tive of the actual cost of living in your city or town?

— Has the candidate estimated his housing expenses by completing the ‘Housing Allowance Work-sheet’ located in the back of the CPG’s?

— Do you need help in developing the Call Package? How can I assist you?

— Are you aware of RBI’s ability and willingness to assist you?

■ Schedule a Call Package review meeting as far in advance of the Presbytery meeting as possible to allow ample time for Call Package re-development if necessary.

■ Utilize helpful tools to assist in the call package examination process (consider using the CPG’s addendum: ‘Presbytery Call Package Review Worksheet’).

■ When Call Packages appear insufficient, discuss this with the church prior to Presbytery. Offer helpful modification suggestions to churches with insufficient funding abilities (e.g. alternative funding strategies like full or partial ‘tent-making,’ partial support raising, a ‘ramp-up’ strategy that starts low but promises to increase compensation and benefits quickly, two-church ‘sharing’ arrangements, circuit/stated supply opportunities, part-time or retiree employment options, etc…).

■ Carefully examine all new Call Packages brought to the floor of Presbytery for approval.

■ Make recommendations to approve Call Packages if consistent with policy.

■ Withhold approval of Packages that are clearly insufficient and endanger the current or future financial welfare of the church, or the pastor and his family.

■ Review any previously approved but clearly ‘insufficient’ Call Packages, and offer assis-tance and encouragement to any church desiring to modify an existing Call Package.

35


“Motion to Adopt and Implement the PCA Call Package Guidelines as a Presbytery Policy”

froM ________________________________________________________________________________________ CoMMittee(s)

of _____________________________________________________________________________________________ Presbytery

Be it resolved that _____________ Presbytery hereby adopts and implements the PCA Call Pack-age Guidelines as its official policy regarding the acceptable form of Call Packages. Every Call Package presented to Presbytery must reflect interaction with these Guidelines by breaking out separate, specific, and sufficient amounts for Salary; Housing Allowance; Retirement Savings (stated as a percentage of Salary plus Housing Allowance); Health, Life, and Long-Term Disability Insurance benefits; Moving Expenses; and Vaca-tion benefits.

AdoPted by _____________________________________________________________________________________ Presbytery

At its stAted MeetiNg, ________________________________________________________________________, 20 _________

Attested by /s/ te __________________________________________________________________________ , stAted Clerk.

This motion is made for the following reasons:

a) The responsibility for the financial welfare of those who preach, teach, and minister the Word of God has always been entrusted to the people of God. In 1 Timothy 5:17-18 the Apostle Paul clearly commends this stewardship by commanding “Let the elders who rule well be considered worthy of double honor, especially those who labor in preaching and teaching. 18 For the Scripture says, ‘You shall not muzzle an ox when it treads out the grain,’ and, ‘The laborer deserves his wages.”

b) The PCA BCO also clearly reaffirms this biblical stewardship by calling upon congregations to make a promise, or a vow, to strengthen their commitment to provide for the financial welfare of their pastor(s) and his family in the following or like manner: “(we) do earnestly call you… promising you, in the discharge of your duty, all proper support,… That you may be free from worldly cares and avocations, we hereby promise and oblige ourselves to pay you… and other benefits, such as, manse, retirement, insurance, vacations, moving expenses etc…” (bCo 20-6)

36


c) The congregations of this Presbytery already affirm this stewardship by utilizing this language, and by making these promises. (Presbytery Minutes)

d) In response to this stewardship, our founding fathers, at our first General Assembly, created and recom-mended sufficient participation in denominational Health, Life, and Long-term Disability Insurance Plans, and participation in the Retirement Plan for all Teaching Elders. (M1gA, 1973 p.49)

e) Many, however, did not heed those wise recommendations, and today have insufficient savings for retire-ment — directly impacting their ability to retire, and also the retirement income of their widows.

f) Statistically, the number of retirees in the PCA is estimated to ‘triple’ in the next 25 years with many of these men and their families being financially unprepared for retirement. (PwC PCA survey, 2011)

g) In response to this retirement readiness crisis, the 2011 PCA General Assembly charged RBI to develop a PCA Call Package Guidelines, and the 2012 PCA General Assembly exhorted Presbyteries and churches to implement these Call Package Guidelines. (M39gA, 2011 p.51; M40gA 2012, p.__)

h) It is the responsibility of Presbytery to approve Calls and Call Packages, and the desire of this Presbytery to take seriously its’ responsibility to guard and protect the welfare of our Congregations, as well as the welfare of ‘every’ Pastor in this Presbytery. We are our brother’s keeper. (bCo 20-1,10)

i) Without a Presbytery policy, it is not likely that the PCA Call Package Guidelines will be implemented, or the looming PCA retirement readiness crisis averted.

37


Presbytery Nameministers’ & Candidates’ Committee

Date

Ruling Elders and Deacons First Presbyterian Church 123 Fifth Avenue City, St 00000

Dear Fathers and Brothers,

In genesis 41 god gave Joseph wisdom to interpret Pharaoh’s dream. that dream, involving 7 fat cows and 7 gaunt cows, 7 plump ears of corn and 7 withered ears, was more than simply a dream. It was a merciful warning concerning an approaching famine. god revealed it for a reason; He intended for Joseph to act on this knowledge. And Joseph did act! With great wisdom and discernment, Joseph employed a wise plan that involved the gathering and storing of 20% of the agricultural harvest during the first 7 prosperous years in order to provide food for the people during the following 7 lean years. god used Joseph’s wise plan to preserve the lives of his entire family—and the Egyptian people as well. It was a difficult time, but god honored Joseph, and blessed this wise plan.

In light of the denomination-wide teaching Elder ‘retirement readiness’ survey conducted in 2011 by PCA Retirement & Benefits, Inc. (RBI) and PricewaterhouseCoopers, this passage has taken on special significance for us. the survey opened our eyes to a number of concerning’ trends in our denomination, including a coming ‘financial famine.’ over the next 25 years, the PCA will experience a demographic tidal wave of ‘baby boomer’ retirees—tripling the number of current retirees, with approximately 34% of them having opted-out of Social Security. given the current lack of preparation, this will significantly impact not only these men, but their wives and their widows in the years to come. PricewaterhouseCoopers estimated that annual relief assistance over the next 25 years will skyrocket from $350,000 per year (2011), to more than $5 million per year. We are already experiencing this reality; more than $489,000 was disbursed in 2015. the survey concluded that the PCA ministerial Relief Fund would be depleted in less than 20 years!

Fathers and Brothers, we believe these statistical truths have come to us as a dire warning! our denomination is facing a retirement readiness crisis—a crisis that will become deeply personal for many pastors and their families over the course of the next two decades. the challenges we face are both real and enormous! And like Joseph, we too must prepare. that is why we are writing to you.

RBI has developed a two-pronged approach to this looming crisis, one they call ‘the prevention,’ and the other, ‘the cure.’ the ‘prevention’ strategy involves helping pre-retired PCA teaching Elders and employees become better pre-pared for retirement. And the ‘cure’ strategy involves a $10 million dollar capital fund raising initiative for the PCA ministerial Relief Fund.

At the center of the ‘prevention’ strategy lays the important step of developing and implementing a new set of PCA Call Package guidelines. many teaching Elders simply cannot afford to save an adequate amount for retirement because of insufficient compensation. others are burdened by unnecessary taxes because of their Call Package structures. to remedy this problem, the PCA 2011 general Assembly requisitioned a new set of call package ‘guidelines’ for the PCA. these guidelines, which were reviewed and improved by numerous Ruling and teaching Elders, do not set a salary level but do call upon churches to make sure every call package minimizes taxes, recognizes the dual tax status of ministers, provides an sufficient salary, and contains the necessary core components or benefits that protect local con-

38


gregations, pastors, and their families. In 2012, the PCA general Assembly received the PCA Call Package guidelines and exhorted churches and presbyteries to implement them!

Biblically speaking, the people of god in each local church have been given the privilege and responsibility to provide for the financial welfare of those whom they have called to preach and teach the Word of god. And every church in our Presbytery has acknowledged this responsibility by promising on the floor of this Presbytery to provide ‘all proper support’ so that their pastors ‘may be free from worldly cares and avocations.’ (BCo 20-6)

And as a Presbytery, we too are called to guard and protect the welfare of all the families who serve in our courts. We are charged with the task of rigorously reviewing the elements of every call package presented for approval. Ruling Elders and teaching Elders alike are called upon to ensure that our pastors are truly free from “worldly cares and avo-cations,” so that they might remain singularly focused on the ministry to which they have been called.

For this reason, and in light of the looming retirement readiness crisis impacting this denomination, at our last meet-ing, after careful examination, and much discussion and prayer, the ________ Committee of ________ Presbytery, made a motion to adopt and implement the PCA Call Package guidelines as a ‘policy’ in our Presbytery. that motion was seconded and carried, and has become our policy in regard to approving all Call Packages.

Simply put, to be approved on the floor of Presbytery, all Call Packages presented to this Presbytery must now reflect active engagement with the PCA Call Package guidelines and break-out separate, specific, and sufficient amounts for Health, life, long-term Disability Insurance benefits, Retirement Savings as a percentage of salary + housing allow-ance, Vacation, and moving expenses. We will no longer approve ‘lump-sum’ packages.

In addition to this policy covering all newly developed call packages, (something already being advised for mNA Plant-ers, and required for mtW missionaries, and RUm Campus ministers) we are asking that you review your current call packages in light of these guidelines.

Please find enclosed a link to a copy of the PCA Call Package guidelines. (http://www.pcarbi.org/) If you would like to discuss this policy further, please give me a call. If you need further assistance structuring or re-structuring a Call Package, or simply need to ask a financial question, then give RBI a call at (800)789-8765.

We would also urge you and your church to begin to take part in ‘the cure’ by participating in the annual PCA Relief Fund offering (if you are not already doing so). Currently, only 27% of our churches participate in this offering which is used to assist widows and pastor’s families who are in serious financial need. this offering has been traditionally known as the ‘Christmas offering,’ but materials are available if you would prefer to participate in this offering at a more opportune time during the year. All materials (video’s, handouts, and envelopes) and information necessary to participate are available from PCA RBI free of charge.

In Christ,

John Doe Chairman, ministers’ & Candidates Committee Presbytery Name (555)555-5555

Committee members

__________________________________ __________________________________ __________________________________

__________________________________ __________________________________ __________________________________

39


Family & Demographics:Is this Pastor married? Y NWhat is his approx. age? _________ Wife's approx. age? _________Number of children: ____ Ages: ________________________________

Does this Pastor/family need benefits? Y N Some? Which? ________________________If not, why not? (military chaplain, retired, wife has benefits, independently wealthy, etc…)____________________________

Primary Benefits:1 . Retirement Contributions (Pastors pay no tax on PCA 403(b) contributions, but must pay 15.3% Social Security tax on IRA contributions.)

a Is the church making retirement contributions? Y N ____________________________________b If so, what percentage of gross salary is being contributed: ______% (Calculate as a % of Salary + Housing)

c Is this % within the 10-15% Guidelines? Y N ____________________________________ (If no contributions, then contributions will need to be made from the Salary package. Deduct 10-15% x 'Salary+Housing' from Salary below)

2 . Healthcare Insurancea Individual: Group: Sharing Ministry: Medicare:

(If Indiviudal, discuss potential tax benefits of Employer-paid or reimbursed plans if he is the only full-time employeee...)

b Is this a High-Deductible Health Care Plan (HDHP)? Y N Deductible amount? $ ____________.00/yr.c Are 'HSA' contributions being made? Y N Contribution to HSA? $____________.00/___d What is the maxiumum annual out-of-pocket expense? $ .00/year

( Risk Alert : If high deductible, and no HSA, ask the Church 'How will he pay for the deductible if required to do so?'e.g. Will 'out-of-pocket' med expenses come from the Pastor's budget, or is the church 'Self-Insuring' for this potential expense?)

e What is the cost? $ .00/month x 12 = $ .00/yearf Does the church pay the premium? y N (Subtract non-Employer paid cost from Salary)g Are the premiums taxable to the pastor? y N (If yes, reduce his Salary by 'Premiums + 22%' more...)

3 . Life Insurancea Is Group Term Life Insurance provided? Y N (PCA RBI Basic + Std Life = $26.48/mo. or $318/yr.)

b How much coverage is being provided? $__________.00 Estimated Need? $______________.00c Is Life insurance coverage sufficient? Y N (Young families = highest need. Any other coverage?)

( Risk Alert : If not provided, discuss with church needed protection for church and family! This ought to be a non-negotiable! )

4 . Long-Term Disability Insurance (LTD)a Is Long-Term Disability Insurance provided? Y N (PCA LTD = $304/yr for $50k Sal, $425/yr for $70k Sal)

( Risk Alert : If not is provided, discuss with church needed protection for church and family! This ought to be a non-negotiable! )

5 . Ministerial Counseling and CoachingConfidential & Affordable Reimbursement plan? Y N ____________________________________

Secondary Benefits:6 . Dental Insurance

Is Dental Insurance provided? Y N ____________________________________7 . Vision Insurance

Is Vision Insurance provided? Y N ____________________________________8 . Long-Term Care Insurance

Is Long-Term Care Insurance provided? Y N ____________________________________Relocation/Temporary Benefits:

9 . Relocation/Moving ExpensesAre moving expenses provided? Y N N/A $_________.00 ______________Other Paid or Reimbursed Expenses? Y N $_________.00 _______________________

Vacations & Leaves:10 . Vacation Weeks/Days Specified? Y N ____________________________________

How many? _____ wks/days. Are these sufficient? Y N ____________________________________11 . Leave Is sick leave, paternity leave, funeral leave, educational leave, or sabbatical leave specified?

If so, describe: ___________________________________________________________________________________

PCA Call Package Guidelines Evaluation and Review Worksheet Candidate: ________________________; Presbytery/Church: ___________________________

This worksheet is based on the most recent copy of the PCA Call Package Guidelines (CPG's), and was developed to help you evaluate a Call Package. It focuses your attention on several key areas, and risk. It's ok if several questions are answered 'No.' Answering 'No' to any particular question may not indicate an insufficient Call Package. To determine that, you must make a judgment call based on all of the answers on this Worksheet. In making that judgment, ask whether this Call Package reflects sufficient conformity to and engagement with the PCA CPG's, and whether it provides the necessary income, benefits, and protections needed. Missing benefits increase a pastor's family's risk, as well as the congregation's risk! Focus on risk! What happens if...? Will he be able to retire?

(Demographic info helps when considering the financial needs of this family. Ask: 'Are there any special needs or

circumstances?')

40


Salary & Allowances:A . Salary (Circle if known: Monthly, Bi-weekly, Semi-monthly, Monthly, Annual)

1 Is Salary specified apart from Benefits? Y N How Much? $ __________________________2 Are Benefits paid by church in addition to Salary? Y N ____________________________________

If not, subtract necessary benefits from his salary on workseet below to discover his net or 'true' salary. B . Housing Allowance

1 Is a Housing Allowance amount specified? Y N How Much? $ __________________________2 Does it appear sufficient? Y N (Ask if Pastor completed Housing Allow. Worksheet?)

3 If manse: is a 'Home Equity Allowance' provided? Y N N/A If not, why not?____________C . Social Security Allowance

1 Has he opted out of Social Security? Y N (Add 12%+ more for ret contributions if he opted-out…)

2 If not, is a 'Social Security Allowance' being paid? Y N If not, why not?______________________(A Social Security Allowance should be at least equivalent to the 7.65% 'Employer Portion' of the tax.)

Salary Worksheet : (Use if any benefits are not provided to discover true Salary; References correspond to worksheet line #'s)

A 1 + Specified Salary (Consider this $60,000 'Lump Sum' example…) + 42,000$ + -$ B 1 + Housing Allowance Estimate Est. + 18,000$ + -$

Subtotal = 60,000$ = -$ 1 - Ret Contribution (1.b,c, C.1 -- if not provided, or deficient) 10 % - 6,000$ - -$ 2 - Health Ins. (2.e,f,g -- if not provided, or deficient.) Est. ($ 900 mo.) - 10,800$ - -$ 3 - Life Ins. (3.a -- if not provided, or deficient) Est. ($ 318 yr.) - 318$ - -$ 4 - Disability Ins. (4.a -- if not provided, or deficient) Est. ($ 365 yr.) - 365$ - -$

C 2 - Social Security Allowance (if not provided, or deficient) 7.65 % - 4,590$ - -$

= ESTIMATED SALARY (consider for 'apples to apples' income comparison) 37,927$ = -$

Call Review / Approval Status: (for Presbytery Committee use)1 . Does this call reflects engagement with Guidelines? Y N ____________________________________2 . Does this net salary appear sufficient for this family? Y N ____________________________________3 . Are all 'primary benefits' provided? Y N ____________________________________

(If not, ask: 'What will happen to this family if he becomes disabled, dies, or has major medical expenses? Will he be able to retire one day?')

4 . Is this call approved? Y N Cnd (Yes, No, Conditionally)

If no, what modifications could be made to make this Call acceptable? ____________________________________________________________________________________________________________________________________________________________________________________________

If Conditions apply, stipulate them clearly: ____________________________________________________________On the condition that: __________________________________________________________________________On the condition that: __________________________________________________________________________On the condition that: __________________________________________________________________________

Committee Members who examined this call:RE TE _________________________________________RE TE _________________________________________RE TE _________________________________________RE TE _________________________________________RE TE _________________________________________

Additional Comments: _______________________________________________________________________________________________________________________________________________________________________

Conditions: For example if the Call Package is insufficient in funding 'retirement', a Committee might ask a church with current financial difficulties to promise to increase retirement contributions over a specified period of time. A Committee might also approve a Call on the condition that 'Employer' benefits be established over a specified period of time to minimize unnecessary taxation; etc...

Make clear suggestions for modification. Refer back to deficiencies noted above. Consider the welfare of the pastor as well as the church. Speak with member(s) of the Session and seek their counsel. Be realistic. If a church budget can not provide sufficient salary & benefits, the Committee might suggest that alternative funding strategies and sources be considered (e.g. partial 'tent-making,' part-time or retiree options, two-church sharing arrangements, circuit opportunities, stated supply, just to name a few...)

Add Salary + Housing Allowance, then subtract the amount that he will have to pay 'out-of-pocket' for Basic Life, LTD, and Healthcare Insurance; also subtract needed Retirement Plan Contributions, and 7.65% Social Security Allowance if not provided by the church. This amount would be equivalent to the Gross Salary he would be paid by an employer who provides benefits (e.g. $38k Salary + Benefits).

41


On the following pages you will find Sample Forms and Policies

R Housing Allowance Worksheet I – Manse

R Housing Allowance Worksheet II – Rental or Mobile Home

R Housing Allowance Worksheet III – Home Owner

R Housing Allowance Resolution

R Sabbatical Policy

R Accountable Reimbursement Policy

R Accountable Reimbursement Form

R The Recommended Form of Call to a PCA Minister

43

Housing AllowAnce worksHeet i(For ministers living in a manse)

Section A

HOUSING ALLOWANCE EXPENSES ESTIMATED AMOUNT

Utilities (gas, electricity, water, trash, phone, cable, internet) ................. $ _______________________

Decoration ................................................................ $ _______________________

Furnishings and Appliances (purchase or repair) ..................... $ _______________________

Landscaping and Yard Maintenance .............................. $ _______________________ (yard service expenses are not excludeable)

Structural Repairs/Maintenance/Materials ..................... $ _______________________

Pest Control ............................................................... $ _______________________

Personal Property Insurance on Contents ......................... $ _______________________

Umbrella Liability Insurance Policy ................................. $ _______________________

Personal Property Taxes on Contents .............................. $ _______________________

Miscellaneous Expenses (light bulbs, cleaning supplies, etc.) ........... $ _______________________

Section B

Total all estimated expenses below on the line designated for “Total Estimated Housing Allowance.” Keep in mind, the estimated housing allowance for ministers living in a manse should be the lesser of the “Fair Rental Value of Home” or the “Total Estimated Housing Allowance.”

TOTAL ESTIMATED HOUSING ALLOWANCE $ _______________________

Minister’s Name: ___________________________________Year _______________________

Disclaimers• Retroactive designations of housing allowance are not legally effective.• The entire housing allowance designated by the Session is not necessarily nontaxable. Rather, it is nontaxable (for income tax purposes)

only to the extent that it does not exceed actual housing expenses or the Fair Rental Value of the home (furnished, including utilities). • A minister’s housing allowance is an exclusion for federal income taxes only. Housing Allowance is subject to Social Security (SECA) taxation

and must be included as taxable income on Schedule SE (unless exempt from Social Security).• Ministers should keep accurate records and receipts of their eligible housing expenses as proof of their expenses.

45

Housing AllowAnce worksHeet ii(For ministers renting or living in mobile home)

Section A

HOUSING ALLOWANCE EXPENSES ESTIMATED AMOUNT

Utilities (gas, electricity, water, trash, phone, cable, internet) ................. $ _______________________

Decoration ................................................................ $ _______________________

Furnishings and Appliances (purchase or repair) ..................... $ _______________________


Structural Repairs/Maintenance/Materials ..................... $ _______________________

Pest Control ............................................................... $ _______________________

Personal Property Insurance on Contents ......................... $ _______________________

Umbrella Liability Insurance Policy ................................. $ _______________________

Personal Property Taxes on Contents .............................. $ _______________________

Miscellaneous Expenses (light bulbs, cleaning supplies, etc.) ........... $ _______________________

Housing Rental Payments ............................................. $ _______________________

Mobile Home Space Rental .......................................... $ _______________________

Section B

Total all estimated expenses below on the line designated for “Total Estimated Housing Allowance.” Keep in mind, the estimated housing allowance for ministers living in a rented home should be the lesser of the “Fair Rental Value of Home” and the “Total Estimated Housing Allowance.”

TOTAL ESTIMATED HOUSING ALLOWANCE $ _______________________

Fair Rental Value of Home (including utilities & furnishings) ........... $ _______________________





47

Housing AllowAnce worksHeet iii(For ministers who own a home and are living in that home)

Section A

HOUSING ALLOWANCE EXPENSES ESTIMATED AMOUNT Utilities (gas, electricity, water, trash, phone, cable, internet) ................. $ _______________________

Decoration/Remodeling/Improvements ......................... $ _______________________

Furnishings and Appliances (purchase or repair) .................... $ _______________________


Structural Repairs/Maintenance/Materials .................... $ _______________________

Pest Control .............................................................. $ _______________________

Umbrella Liability Insurance Policy ................................ $ _______________________

Personal Property Taxes on Contents ............................. $ _______________________

Down Payment on a Home .......................................... $ _______________________

Mortgage Payments (principal & interest) .............................. $ _______________________

Homeowners Insurance ............................................... $ _______________________

Home Improvement Loan (principal & interest) ........................ $ _______________________

Real Estate Taxes ....................................................... $ _______________________

Real Estate Closing Costs (escrows, commissions, etc.) ............... $ _______________________

Homeowner’s Association Dues .................................... $ _______________________

Miscellaneous Expenses (light bulbs, cleaning supplies, etc.) .......... $ _______________________

Section BTotal all estimated expenses below on the line designated for “Total Estimated Housing Allowance.” Keep in mind, the estimated housing allowance for ministers living in a manse should be the lesser of the “Fair Rental Value of Home” or the “Total Estimated Housing Allowance.”

TOTAL ESTIMATED HOUSING ALLOWANCE $ _______________________ Fair Rental Value of Home (including utilities & furnishings) ........... $ _______________________





49

Housing AllowAnce resolution

Resolution of the Session of (church name) (PCA)Designating a Portion of The Reverend (minister’s first name, last name) (Year) Compensation as Rental/Housing Allowance

Whereas, Internal Revenue Code Section 107, as well as the associated Regulations and Rev-enue Rulings, provide that the portion of a minister’s remuneration, designated as a rental/housing allowance by the employing church or other qualifying organization, is excludable from the minis-ter’s gross income under Section 107 of the Code; and

Whereas, the Session of (church name) (PCA) is a qualifying organization,

Now, Therefore, be it Resolved that $(housing amount) of the compensation paid the Rev-erend (minister’s first name, last name) during (year) is designated as a rental/housing allowance in accordance with the provisions of Section 107 of the Internal Revenue Code.

Now, Therefore, be it Resolved that the amounts so designated as rental/housing allowance are excludable from gross income of the recipient only to the extent that said amounts are used to rent or provide a home. Further, the amount eligible for the Section 107 exclusion may not exceed the fair rental value of the minister’s home (including furnishings and appurtenances) plus the cost of utilities. To the extent a greater amount is designated as rental/housing allowance, the designation will be ineffectual with respect to such amount.

This Resolution is recorded in the church minutes and is applicable for calendar year (year) and all future years unless otherwise provided by the Session.

Adopted on (current month, day, year)

Session of (church name) (PCA)

Clerk of Session Signature: __________________________________________________

Clerk of Session Print Name: __________________________________________________

Date: __________________________________________________

* Please provide a copy of this signed document to your minister.** Retroactive designations of housing allowance are not permitted by law.

51

sAbbAticAl Policy

Sabbatical Policy for (Church Name) (PCA) PREAMBLESabbatical leave is periodically granted to ministerial staff and its purposes are twofold:1. To give time off to ministerial staff for personal and professional enrichment in accordance

with the Biblical principal of rest and refreshment embodied in the Sabbath. 2. To encourage longevity, a commitment to growth, and excellence among the ministerial staff

in the church.

POLICY1. Eligibility & Requirements – (all or certain classification of ministers eligible) are

eligible to take a sabbatical leave at least once every (e.g. seven years). These ministers must be in good standing with the church and have no intent to leave.

The Sabbatical should be spent in rest, reading, study, or ministry designed to refresh and encourage the minister in their walk with the Lord and ministry.

Eligible ministerial staff members will submit a written proposal to the Session regarding how the Sabbatical will be spent at least (e.g. three months) in advance of taking Sabbatical leave. The dates of the Sabbatical leave should be submitted at least (e.g. six months) in advance to allow for arrangements to be made for the staff member’s absence.

2. Length – A sabbatical leave will be (e.g. three months) in length off from the usual and customary labors of church ministry. (e.g. Three months) is (e.g. thirteen weeks) or (e.g. 91 days) .

3. Compensation – During sabbatical leave, the employment relationship and all call package provisions remain in effect, with the exception of study leave. Holidays, vacation and leaves of absence will be available during the balance of the year; however, ministerial staff members should not schedule vacation near their sabbatical, causing undue hardship on the ministry of church. The study leave portion of an ordained minister’s call package will be included within the sabbatical.

Ministerial staff members will discuss with the Session sabbatical expenses related to travel and/or education, and a stipend may be awarded to cover these costs.

4. Required Report – Staff returning from Sabbatical leave will report verbally and in writing to the Session regarding the activities and benefits of the Sabbatical period.

5. Additional – Sabbatical funding should be a part of the general fund budget and considered in the planning process during the year before the Sabbatical is requested. If plans include travel or additional expenses for which assistance is requested, these expenses must also be planned in the budget cycle of the preceding ministry year.

NOTE: Sabbatical leave is not intended to be an extension of the Family and Medical Leave Act (FMLA), short & long term disability and/or any other benefit provided by the church.

53

AccountAble reimbursement Policy

I. Initial Action Steps

A. Decide what expenses will be covered and then determine how much money the church will budget to cover these expenses. It is important to note, the budgeted amounts should be separate from a minister’s/ employee’s income.

B. Next, send notification of the new policy to all employees and instruct them to submit an Accountable Reimbursement Form within 60 days after expense was incurred. Receipts should be required for any purchased items over $75.00 according to IRS rules. PCA Churches may implement a policy that requires receipts for reimbursements less than $75.00. Mile-age should also be tracked and reported on the form.

C. Lastly, reimbursement to ministers/employees should occur on the regular payroll cycle. If this is not administratively possible, it should occur at least once a month.

II. Implement the Accountable Reimbursement Policy

Have the Session or applicable committee approve the sample Accountable Reimbursement Policy listed below. It may need to be modified based on expenses that will be covered.

(church name) (PCA) Accountable Reimbursement Plan

(church name) (PCA) hereby establishes an accountable reimbursement plan for all ministers and employees. The following terms and conditions are intended to comply with all applicable tax rules.

(church name) (PCA) will reimburse only for ordinary, reasonable and necessary ministry-related business and professional expenses incurred by a minister or employee. Subject to budget limitations and the availability of funds, these expenses will include the following:

• Business use of a car, up to the current IRS standard business mileage rate,• Business-related travel away from home: transportation, meals, parking, lodging and tolls on

overnight trips;• Expenses for meetings including General Assembly, Presbytery meetings, conferences and workshops;• Expenses for continuing education including tuition and books;• Subscriptions to journals and magazines, books and software related to the ministry;• Entertainment expenses related to the ministry;• Computers and cellphones if used for the convenience of the church and not the minister, and

as a condition of employment for the minister.

The minister or employee will account for each allowable expense, in writing, at least every 60 days. Documentation will include the date, amount, place, business purpose and relationship of any person entertained for each ministry expense. A receipt will accompany the documentation where purchased items exceed $(enter dollar amount $75.00 or less).

54

Em

plo

yee

Nam

e:D

epar

tmen

t:

Adm

inis

trat

or:

Dat

eR

easo

nM

ileag

eA

llow

ance

Tran

spo

rtF

uel

Lo

dg

ing

Bkf

stL

un

chD

inn

erP

ho

ne

Oth

erTO

TAL

06/1

5/16

GE

NE

RA

L A

SS

EM

BLY

3720

.54

$

275.

00$

15.0

0$

95.0

0$

5.25

$

12

.00

$

22

.00

$

444.

79$

06

/16/

16G

EN

ER

AL

AS

SE

MB

LY-

$

95.0

0$

4.75

$

6.

75$

34.6

5$

14

1.15

$

06/1

7/16

GE

NE

RA

L A

SS

EM

BLY

3720

.54

$

75.0

0$

7.

00$

95

.00

$

2.

30$

199.

84$

-

$

06/2

0/16

DIS

CIP

LIN

G M

EM

BE

R13

7.22

$

14

.73

$

4.

50$

26

.45

$

06

/21/

16V

ISTA

TIO

N (

CA

RD

)6

3.33

$

3.

33$

-

$

06/2

5/16

ED

UC

AT

ION

AL

(BO

OK

S)

-$

46

.25

$

46

.25

$

-

$

06/2

8/16

AD

MIN

IST

RA

TIO

N (

CO

MP

UT

ER

)-

$

473.

96$

47

3.96

$

-$

-$

-$

-$

-$

-$

-$

-$

-$

-$

-$

51

.62

$

350.

00$

22.0

0$

285.

00$

12

.30

$

33

.48

$

56

.65

$

524.

71$

TOTA

L

1,33

5.76

$

A

pp

rove

dN

ote

s20

16 M

ileag

e R

ate

$0.5

40

Dat

e S

ub

mit

ted

:30

-Jun

-16

Sig

nat

ure

:Rev

. Joh

n D

oe

Sub

mit

to A

dmin

istr

ator

bef

ore

the

15th

of e

ach

mon

th.

Joe

Trea

sure

r

Use

sep

arat

e lin

e fo

r ea

ch u

niqu

e re

ason

. A

dmin

istr

ativ

e an

d E

nter

tain

men

t cha

rges

req

uire

se

para

te r

easo

ns a

nd s

houl

d be

not

ed in

the

“Oth

er”

colu

mn.

For

adv

ance

boo

king

s, in

clud

e da

te(s

) tr

avel

is to

occ

ur in

the

“Rea

son”

col

umn.

Joe

Trea

sure

r

Rev

. Joh

n D

oeP

asto

ral

SAMP

LE

AccountAble reimbursement Form

55

(church name) (PCA) being on sufficient grounds well satisfied of the ministerial qualifications of you, (first name) (last name) , and having good hopes from our knowledge of your labors that your ministrations in the Gospel will be profitable to our spiri-tual interests, do earnestly call you to undertake the pastoral office in said congregation, promising you, in the discharge of your duty, all proper support, encouragement and obedience in the Lord. That you may be free from worldly cares and avocations, we hereby promise and oblige ourselves to provide you with the following salary, benefits, vacations and leaves of absence.

SALARY & HOUSING ALLOWANCES

Gross Salary on a (weekly, bi-weekly, semi-monthly, monthly, etc.) basis $ ( Amount designated as Housing Allowance* $ ) BENEFITS

Primary Benefits

Healthcare and Medicare Supplement Insurance/Allowance $ Retirement Savings** – amount equal to (percent of salary & housing) % of salary & housing $ Long Term Disability Insurance – replaces (percent of salary & housing) % of salary & housing $ Life Insurance - amount equal to (number that’s multiple of salary & housing) times salary & housing $ Social Security/Medicare Allowance $ Equity Allowance for ministers who are living in a manse $ Leadership Counseling/Coaching $

Secondary Benefits

Dental $ Vision $ Long Term Care $ Benefits Total $

TEMPORARY BENEFITS

Relocation expenses will be reimbursed but should not exceed the following $ Other $ Temporary Benefits Total $

TOTAL AMOUNTS $

tHe recommended Form oF cAll to A PcA minister

56

VACATIONS & LEAVES OF ABSENCE

Vacation Days Sick Leave Days Paternity Leave Days Funeral Leave Days Educational Leave Days

Sabbatical Leave Days, after Years

ATTESTATION

I, having moderated the congregational meeting which extended a call to (minister’s first name, minster’s last name) for his ministerial services, do certify that the call has been made in all respects according to the rules laid down in the Book of Church Order, and that the persons who signed the call were authorized to do so by vote of the congregation.

Clerk of Session:

Signature __________________________________________________________________________________________________________________________________________________________

Print Name ________________________________________________________________________________________________________________________________________________________

Date _______________________________________________________________________________________________________________________________________________________________

Minister-Elect

Signature __________________________________________________________________________________________________________________________________________________________

Print Name ________________________________________________________________________________________________________________________________________________________

Date _______________________________________________________________________________________________________________________________________________________________

Send a copy to each of the following: 1) Minister-Elect 2) Stated clerk of the Presbytery

* Section 107 of the Internal Revenue Code allows a minister to exclude a housing allowance from their taxable salary for eligible housing related expenses (i.e. mortgage payments, rent payments, utilities, etc.). It is important to note that the housing allowance is excludable for income tax purposes only (e.g. federal, and most states). It is not excludable for Self-Employment tax purposes (i.e. SECA) which are paid into the Social Security and Medicare system.

A minister’s total cash salary can be broken down into two parts: 1) Taxable Salary and 2) Housing Allowance (Partially Taxable Salary).

MINISTER’S SALARY

Taxable Salary Housing Allowance (Partially Taxable Salary)

• Taxable for Self-Employment Tax Purposes• Taxable for Federal Income Tax purposes

• Taxable only for Self-Employment Tax Purposes

** There is an annual limit on the amount of total contributions (i.e. employee and employer contributions) that can be made to a 403(b) plan. This limit is referred to as the 415(c) limit and, for 2017, it is the lesser of $54,000 or 100% of includible compensation for your most recent year of service. However, it is important to note that a minister’s housing allowance cannot be included as part of includible compensation because it is not a component of a minister’s gross income (1.425-2(d) of income tax regulations). This limit may reduce the amount that can be contributed to a retirement account even though the call package guidelines formula includes it (i.e. retirement contributions are a percentage of salary and housing allowance).

Additionally, for those churches where the minister resides in a church owned manse, the calculation of retirement benefits should be adjusted up to reflect the difference between a manse-based housing allowance and a personal home ownership housing allowance. To do otherwise would underfund the minister’s retirement plan.

PCA Retirement & Benefits, Inc.1700 North Brown Road, Suite 106Lawrenceville, GA 30043800.789.8765678.825.1260www.pcarbi.org