Is It Okay for a Minister to Opt Out of Social Security?

I’d be interested to see if people who are OK with opting out would address Moore’s points in his article. I agree with Larry and with Moore and was not able in good conscience to opt out when I first became a pastor.

The young minister states his case:

The reason I did this is because, frankly, I don’t think Social Security will be around for me when I retire anyway. I’m in my twenties and, given the entitlement mess our government is in, I don’t see any way the system is still around when I would need it

Opting out on the principle that one should provide for himself and that social security is not a legitimate function of government is different than opting out because it’s a bad business decision

Moore agrees with me (or I with him)

The so-called “opt out” for Social Security exists to protect the consciences of those preachers of the gospel who believe that public insurance is sinful, or who believe public insurance as it relates to ministry violates principles of the separation of church and state. I’m glad this conscience clause exists, for the same reason I’m glad there is a provision for “conscientious objectors” in our military policy even though I’m not a pacifist. These exception clauses protect religious liberty for all of us.

In the eyes of the IRS, this IS a tax issue.

They, on their form, say it is an issue of conscientious objection, and objection based on religious principles. That, as I read it, is not about taxes but primarily about a person’s conscience with respect to ministerial income.

Theologians can debate it until the Lord returns, and it may be a very personal and theological decision, but when it comes to how you are going to file your tax return, this is absolutely and ultimately a tax issue which has been hammered out and shaped in court for years.

It has nothing to do with filing your tax return. That part is simple. When it comes to Social Security wages, you file based on whether or not you have filed a 4361. It doesn’t take a tax expert to know that. Even the IRS phone jockeys can tell you that. What a tax expert cannot address is the very basis of the objection … your conscious and your religious principles.

How does a tax expert help you decide what the Bible teaches about this issue? What qualifies a tax expert to comment on how the Bible teaches income from ministerial services should be used with respect to public insurance?

Where a tax expert is handy is in the case of housing allowance, how to file social security/medicare for those who have not opted out, etc.

I am willing to entertain your suggestion if you can explain how a tax expert addresses matters of conscience.

My point is not that it is a “financial planning” issue, but that it is an area where you had better dog gone well know what you are doing before the IRS.

If you sign the 4361, the IRS doesn’t care anymore. It’s between you and God at that point, I think.

I would personally put very little weight in what the average pastor has to say about the matter.

Me too, but for an entirely different reason, most likely.

BTW, you have to file the 4361 within two years of receiving at least $400 dollars in ministerial income as a licensed or ordained minister.

Larry,

I think we are simply talking past each other.

First, the key words in your post #33 are “as I read it” and “I think.” When it comes to taxes, I am sorry but that simply isn’t good enough.

Second, we can wrestle with this issue all we want to, but at the end of the day, there are TAX issues involved here, such as: the deadline to file the form; what income you have to pay SS on if you do not choose to opt out; what your options are if you change churches; and how the tax courts have defined some of the very issues people are “wrestling” with in their consciences here.

I am not saying we should not be wrestling with the issue as a matter of conscience; I am saying that unless you are an expert on clergy taxes you should probably keep the wrestling inside your conscience and not be giving advice on the matter, to put it bluntly.

One of the “beauties” of our independent church movement is that when a 20-something-year-old guy gets out of college or seminary and takes a pastorate in a little country church, he is left to swim on the ocean with regard to dealing with these kinds of things. That guy needs to call Worth Tax Service, not rely on a discussion like this for answers. (To put it bluntly again. :) )

And, as I said before, he must also not rely on “Joe’s Laundrymat and Tax Professionals.”

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Also, “What qualifies a tax expert to comment on how the Bible teaches income from ministerial services should be used with respect to public insurance?”
Answer: If the tax accountant has a Christian worldview and is an expert on IRS rulings and tax law, I would rely on his or her expertise in this case much more than I would a pastor or theologian who has no idea or comment on what has happened in 30 years of case law.

Paul,

I appreciate your bluntness. I have no objection to that, conscientious or otherwise. We may in fact be talking past each other. The things that the “key words” (as you point them out) are not really up for debate are they? I think they are clear if you read the paperwork. It is about conscientious objection and receiving public insurance based on ministerial income.

Second, I don’t think I have given any advice. I haven’t intended to, aside from simply thinking about the actual issues of conscience, and not retirement strategy. I think Moore gave some very wise advice here (at least up to the point I read).

Third, you have properly identified a number of tax issues. But you (wisely) not included the actual under discussion, that of the issue of church/state with respect to public insurance and clergy conscience. Again, I am not clear how conscientious objection to receiving public insurance based on ministerial income is properly a tax issue because it is not about “paying” (which is a tax issue) but about “receiving” (which is a benefit issue). It seems to me to be a conscious issue (which is why it is framed as “conscientious objection” and violation of religious principles with respect to receiving public insurance).

So my question still stands: How can a tax professional help a pastor decide a matter of conscious about the biblical teaching on money received for work as a clergyman? Isn’t that a theological question?

I am seriously asking for an answer to that question. Tax professionals, as I understand, deal with tax issues. This is an issue of conscience (according to the IRS form 4361 and the statement of affirmation). The IRS are the ones who used those words. So what expertise on conscious does a tax professional bring to the conversation?

Answer: If the tax accountant has a Christian worldview and is an expert on IRS rulings and tax law, I would rely on his or her expertise in this case much more than I would a pastor or theologian who has no idea or comment on what has happened in 30 years of case law.

Your answer posted while I was writing my previous post. This is a fair answer. My only caution would be recognized that tax professionals, by design, are generally about paying hte least possible taxes and they are not equipped to make decisions of conscience. It seems to me that a pastor or theologian would be much more equipped to address that issue.

When my husband opted out of SS (because he could not truly sign his name to a statement that he “objected on religious principle” to receiving benefits from the gov’t), he did consult with a renowned expert on church finances. The finance expert told Jason that, although the wording has changed slightly over the years, the way the form is currently worded means that anyone opting out would have to be adamantly opposed to receiving financial benefits from the gov’t. It is not a matter of whether or not one agrees that the gov’t should take the money to begin with. In fact, he said that the only people he’s encountered that legitimately opt out are the Amish—they are so completely opposed to receiving gov’t benefits that even though they pay in, as required by law, they will refuse any check from the gov’t; instead, the Amish all pay into a community pool out of which they take care of the financial needs of the members of their community.

Jason also consulted with a lawyer who specializes in church finances. Same answer. If one signs the IRS form, he is saying that his conscience forbids him from accepting public assistance with retirement, death benefits, or medical expenses based on his income as a minister.

So the input from tax experts did not affect our theological understanding of the issue. It has nothing to do with being given the choice to opt out (although, to be fair, the form could have been worded differently in the past, when others opted out). Nor is it about our views on government responsibility or socialism. It has to do with whether one can honestly say that one’s conscience forbids him from accepting gov’t assistance.

This is an interesting and important topic.

My quick answer is that based upon the way that Dr. Moore has phrased the question the young man in question would be unethical in opting out, since the young man specifically says, “The reason I did this is because, frankly, I don’t think Social Security will be around for me when I retire anyway. I’m in my twenties and, given the entitlement mess our government is in, I don’t see any way the system is still around when I would need it.”

Unfortunately for this young man (and many like him), if he has already opted out, it is currently impossible to change this status - even if (unlike this young man) the minister opted out with a clear conscience for what he thought were valid reasons at the time but has later come to a different conclusion on the matter.

Having said that, as I read Dr. Moore’s answer to this question, I find his answer to be wanting in at least a couple of areas.

For instance, Dr. Moore comments:

[Moore to the Point - Answer]
The Scripture commands believers to pay “taxes to whom taxes are due” (Rom. 13:7).
Keep in mind, these taxes were commanded to be paid to a Roman government made up of polytheist dictator-worshippers. Some of the taxes given by the New Testament Christians would have gone to pay for crucifixion stakes. Some would have gone to feed wild beasts for the bloody circuses. Some would have gone to buy incense to be burned in honor of the self-proclaimed deity of the Caesar. The believers are commanded, nonetheless, to pay their taxes.

The problem with this comment is that it begs the question. The government has given the option for ministers to not pay and to not receive benefits and given qualifications for allowing this option to be exercised, so this objection by Dr. Moore is irrelevant. Are believers to pay “taxes to whom taxes are due”? Absolutely. I doubt many (any?) of those arguing for opting out would disagree with this statement in any way. The question this statement begs is simply this: “are these taxes due”? To follow his logic on this point would require that believers pay every possible tax placed upon them rather than taking the exemptions that the government allows (such as the mortgage interest deduction). I doubt many here (including his supporters) would hold to such a position.

The additional comments about the wickedness of the Roman government is irrelevant to the point. (And is probably more in line with the question of whether Christians should pay taxes at all, rather than this specific question of Social Security.)

In fact, the next few paragraphs (which deal with the “render unto Caesar” passage, how long Social Security will last, etc.) are also irrelevant to the discussion, since they are rooted in the question he has not answered.

I think his “conscientious objector” parallel is fairly accurate and I don’t have much disagreement with him in that area.

However, the Dr. Moore muddies the water again when he asks:

[Dr. Moore] As you make this decision, ask yourself whether you plan to preach and teach your people that participating in Social Security (as payer or recipient) is a sin against God.

He either does not understand the question of the exemption or something is wrong with the manner in which he articulates what he is saying. The exemption from SS is not an absolute exemption in regards to any participation in SS (in fact, even those exempt have to pay SS for any non-ministerial income they receive - and are entitled to receive SS benefits based on that payment), but rather in regards to receiving SS benefits from income received from ministerial duties. To imply that one cannot ethically opt out of SS for ministerial income without being willing to preach against SS in all of its forms to the congregation is placing an additional burden that the IRS simply has not done - and is not the scope of the exemption.

So, while I agree with the need to think ethically about this and while I tend to think the exemption side has a pretty high hurdle to jump with the very specific nature of the wording of the exemption (was it always worded this exact way?), I don’t think Dr. Moore has made his case very well.

Just my thoughts,

Frank

Thanks for all the posters in this discussion. I think the language and intent has changed a bit since I had to make this decision years ago.

A person needs both Theological and tax advice to gain understanding on the issues at hand, and wisdom from God on the decision itself.

I have often wondered if this little component of the legal system could be used against ministers in the future.

For those who have opted out, look into a 403(b)(9). It is a very specific retirement program that allows the salary deferrals and housing allowance to be treated and withdrawn separately after 59.5 years of age.

[dmicah] For those who have opted out, look into a 403(b)(9). It is a very specific retirement program that allows the salary deferrals and housing allowance to be treated and withdrawn separately after 59.5 years of age.

Unless you’re contributing over $5,000 a year, go with a Roth IRA. The contributions are not tax deductible, but the growth and distributions are tax free.

Unless you’re contributing over $5,000 a year, go with a Roth IRA. The contributions are not tax deductible, but the growth and distributions are tax free.

In retirement, the 403b (probably) allows for housing expenses to be pretax just as salary is before retirement. The Roth does not allow that. So it can be wise to have both, for different purposes.

[Larry]

Unless you’re contributing over $5,000 a year, go with a Roth IRA. The contributions are not tax deductible, but the growth and distributions are tax free.

In retirement, the 403b (probably) allows for housing expenses to be pretax just as salary is before retirement. The Roth does not allow that. So it can be wise to have both, for different purposes.

Which is better (1) to have $10,000 a year that is not taxed (housing allowance from 403 (b) distributions) or (2) to have $40,000 a year that is not taxed (Roth IRA distributions that have grown tax-free)? It seems that maxing out two Roths each year—one for me and one for my spouse—and investing them in growth stock mutual funds (sorry, Dave Ramsey proselyte) is the more wise option than contributing to a tax-deferred 403(b). ;)

The only way I would go with a 403(b) is if my church were matching my contributions—i.e. giving me “free” money.

Which is better (1) to have $10,000 a year that is not taxed (housing allowance from 403 (b) distributions) or (2) to have $40,000 a year that is not taxed (Roth IRA distributions that have grown tax-free)? It seems that maxing out two Roths each year—one for me and one for my spouse—and investing them in growth stock mutual funds (sorry, Dave Ramsey proselyte) is the more wise option than contributing to a tax-deferred 403(b). Wink

There are a lot of variables here, like tax bracket (now vs. future), housing situation (now vs. future), etc. Someone who can change their tax bracket with a $10,000 contribution is in a different situation than someone who can’t. If you anticipate that your tax bracket will be lower in retirement, you get a bigger tax break now for a traditional or 403b than for a Roth in retirement, so there are a lot of variables. I am not sure there is “one right answer” for everyone.

This is where you need a good financial planner to talk to.

Remember also that question is not “tax now vs. tax then.” For housing the 403b is “no tax now and no tax then.” With the 403b you are actually avoiding taxes twice (not just once like you are with the Roth). Ramsey is right for those who don’t get a tax-free housing allowance in retirement. But I don’t think he is right (if you have cited him correctly) about clergy situations.

And remember that some people say (with good reason) that the Roth vs. traditional is close to a wash in many cases. Again, you have to think about tax brackets (both now and then) and a host of variables. It feels good to say, “I will avoid X% of tax on $10,000 then,” but remember you are paying X% now. So in a Roth, less money will be growing.