7 Concerning Findings About Benefits for Pastors and Church Staff

We recently hired a senior pastor. Our church does not maintain a group health insurance policy, but we give our pastoral staff an overall compensation package that includes his base salary and nontaxable housing allowance per his discretion as well as certain fringe benefits. These benefits include a retirement program in either a 403B, or half of social security self-employment tax of 7.65%, or both if he desires. They also include a section 105 health care reimbursement plan, and any life insurance, disability insurance, and continuing education funds he wants.

Instead of us dictating how much we will pay for these various benefits, we just give him an overall compensation number. For example, we tell him that his overall compensation is $80K. He can allocate that $80K however he so desires. He can opt for $50K of that as cash salary and $30K of it to go to various benefits. We do this to give him maximum flexibility.

We’ve tried to follow the advice given by http://ssfoundation.net/churches/

The article doesn’t directly link to the survey so I wonder the size makeup of the 2,500 churches questioned. If a congregation is less than 100 it would be difficult for it to provide all the benefits mentioned. There is a difference in refusing to provide and having the inability to provide.

Regarding the health insurance. My company lost its group plan twice (Principal Financial withdrew from the Nevada market, and then the new plan did not meet the requirements of the ACA). The cost for a replacement plan was too high, so we stopped playing the game. Instead, we provide key employees with a medical stipend to go out and purchase their own personal plans. My family chose Medishare. We save money (roughly 50% over an ACA compliant plan), and have much better catastrophic coverage.

I highly recommend Medishare for churches.

https://mychristiancare.org/medi-share/

[Sean Fericks]

My family chose Medishare. We save money (roughly 50% over an ACA compliant plan), and have much better catastrophic coverage.

I highly recommend Medishare for churches.

https://mychristiancare.org/medi-share/

One of our pastors uses Medishare. Unfortunately, if you have a pre-existing condition (which he does) Medishare penalizes you for the first several years you’re in the plan. This has caused tremendous hardship for him and his family.

True that, and you have to agree not to commit adultery or get drunk. My wife’s pre-existing condition is not covered either. Fortunately (for us), it isn’t very expensive to maintain. But at half off the ACA plans, it may be worth it, even with many pre-existing conditions.

Epaphroditus Minsitries is an excellent resource. For more information, you can contact Bro. Randy Williamson. He is a dear brother in Christ, with extensive investment and business experience and a heart and vision to help churches develop solid financial plans and strategies.

If I understand the law correctly, “medical stipends” are taxable. Is that correct?

[Steve Newman]

If I understand the law correctly, “medical stipends” are taxable. Is that correct?

I’m not sure what you mean by “medical stipend,” but a a section 105 health care reimbursement plan allows one to put certain monies aside tax free to cover eligible medical expenses. There is some question as to whether private insurance premiums are considered “eligible medical expenses” under a Section 105 plan. Consult your tax attorney or CPA.

If I am correct (and you’d have to double-check this with a licensed or professional source), the key is designating the “medical stipend” as a separate fund or disbursement, distinct from your salary - in conjunction with what Steve N. has also shared about Section 105. But I am no authority on this, to be sure.

Yes. They are taxable. But Medishare is half the price of an ACA plan. Thus, it worked for me. And I am free. I don’t have to bow to the ACA requirements. I have a $10k deductible, and everything after that $10k / year is taken care of. If I should require brain surgery (as some have suggested), I would only have to pay $10k / year for care. No 80/20 on this plan.

I remember having a deacons’ meeting where we were discussing how to provide for our pastors, and after what seemed like hours of hemming and hawing, I asked my pastor what he felt the Biblical obligation of the church is. His response resolved the issue in minutes; you can never pay a pastor according to having an advanced degree, but you can pay him enough so he is taken care of.

Seems like that’s a good position for medical insurance as well. Is your pastor covered so if he, or someone in his family, needs significant care? Say a broken arm, minor surgery, etc..? I once stood up for the youth pastor’s family—while I wasn’t even a church member yet—pointing out that with six children, an emergency room visit was pretty likely, and the church’s choice was a $500 problem to get him insurance, but a $5000 problem if they were not able to. It’s just good stewardship.

These benefits include a retirement program in either a 403B, or half of social security self-employment tax of 7.65%

FYI, the church cannot pay the 7.65% of the social security self-employment tax. There are ways around it, but the church cannot pay it. Any money included for that purpose has to be included as gross income.

[Larry]

These benefits include a retirement program in either a 403B, or half of social security self-employment tax of 7.65%

FYI, the church cannot pay the 7.65% of the social security self-employment tax. There are ways around it, but the church cannot pay it. Any money included for that purpose has to be included as gross income.

Correct. That is why the church includes that as part of his overall compensation package. We give him, for example, $80K, and he can decide how he wants to designate it. If he opted out of SS, he can use that portion for something else or put it into a 403b, which the church will set up for him. Or, if he contributes to SS, he can use part of the $80K for the 7.65% se tax and also set up a 403b with his remaining funds. Again, we designed the compensation package to be flexible. He can decide how he wants to direct his funds, and we will set up the appropriate retirement account and medical savings account based on his designation.

When I accepted my first pastorate, I was asked: “Can you live on $_____ a week?” In my youthful naivety I responded, “Could you?” It remains a good question.

[Ron Bean]

When I accepted my first pastorate, I was asked: “Can you live on $_____ a week?” In my youthful naivety I responded, “Could you?” It remains a good question.

I agree. If a church of 100 cannot provide their pastor the similar benefits they typically expect and enjoy with their jobs (e.g. 401K/403b, life ins, medical ins / HSA, 2-3+ weeks of vacation, etc.), while they live in nice homes, have multiple cars, and take nice vacations every year, then they don’t deserve a pastor.