What is an Accountable Reimbursement Plan

Churches want and need to reimburse pastors for business expenses associated with their ministerial duties. For that reason, reimbursable expenses are an important element of funding a pastor’s work. However, it is important to note that these expenses are not compensation for the pastor and should not be included as part of his call package. Instead, they should be included as specific line items in a church’s overall budget and devoted to specific anticipated expenses that the church will incur as the pastor does his job.

A tax code compliant, Accountable Reimbursement Plan is the best way for churches to reimburse these expenses and avoid exposing pastors to unnecessary tax liability (it is often the case that money intended for ministry expenses can lose close to 30% in purchasing power when the money passes through payroll).

Reimbursing expenses with a plan like this will also provide appropriate oversight and accountability. An Accountable Reimbursement Plan defines a maximum amount of reasonable and necessary business expenses the church commits to spend to support various ministerial activities. Examples of reimbursable expenses include:

• A yearly allowance for resources such as books, computer software, subscriptions, etc.
• Funds to pay for meals associated with pastoral work.
• Equipment such as a computer, printer, and other necessary office supplies.
• Reimbursement for a pastor’s cell phone.
• Travel expenses (such as mileage, hotel costs and airline tickets) for attendance at denominational meetings such as presbytery or general assembly.
• Continuing education for the pastor (conferences, classes, etc.).

To ensure that churches properly budget for these expenses, churches should not simply give pastors a lump sum for expenses. Instead, churches and pastors should work together to estimate reasonable costs for these items. Then, the church should create a line item in its annual budget for each reimbursable expense that is distinct from the pastor’s compensation and benefits.

A reimbursement policy should also include a process to ensure that the budgeted funds are spent appropriately. If a pastor spends his own money on ministry expenses, he should present receipts to the church treasurer or bookkeeper, noting the budget category for each purchase. The treasurer or bookkeeper can then ensure that the purchase is appropriate and reimburse the pastor. Alternatively, if the church issues a credit card to the pastor, he can use that card to pay for ministry expenses, and present receipts to the treasurer or bookkeeper, who can ensure that the purchase is appropriate and pay the credit card bill.

Churches who follow this process can protect their pastor from tax liability and ensure that he has sufficient funds to do the important work of ministering to his local congregation.

For more resources on developing a well-designed call package for pastors, visit genevabenefits.org/call-package-guidelines.