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Healthy Guide for your Pastor’s Salary & Benefits Plan

Rev. Paul Chi - CRPC®

When a pastor accepts a call, a special relationship is formed as he begins to shepherd a congregation. Jesus describes how a shepherd lays down his life for the sheep (John 10). The shepherd is not merely a hired hand; he devotes his life to seek the wellbeing and health of each individual sheep. It is a calling of service and sacrifice. In light of this, Paul exhorts churches to care for their pastors as they fulfill the work of their calling (1 Tim. 5:17-18). A key component of care is how a pastor’s salary and benefits package (also referred to as a Call Package) is structured with the whole person in mind. Paul understood that churches can only be as healthy as their pastors, which includes physical, spiritual, and emotional health in their ministry and family.

Healthy pastor. Healthy family. Healthy church.

A person desiring physical health is usually advised to focus on sleep, diet, and exercise. These are essential elements that cannot be seen in isolation. Good sleep with a poor diet is not healthy, as exercise with inadequate sleep and junk food is also not healthy. Physical health comes by combining all of these elements into a comprehensive plan. Similarly, a pastoral call package is a comprehensive plan combining essential elements related to compensation and benefits. Geneva’s comprehensive PCA Call Package Guidelines assist pastors, sessions, and lay leaders in constructing a thorough compensation and benefit plan. Each element plays an important role in nurturing a healthy pastor, a healthy family, and a healthy church. These elements cannot be seen in isolation from one another. For this reason, churches should not simply offer a lump sum for compensation. Instead, a well-structured call package will consider each of these four essential elements together:

  • Salary
  • Retirement
  • Insurance
  • Wellbeing

Essential Element #1: Salary
A call package begins by providing an appropriate salary with a portion designated as housing allowance. What is an appropriate salary? According to the PCA Book of Church Order (20-6), churches should compensate pastors sufficiently that they “may be free from worldly cares.” This provides a standard for a church’s leadership to flesh out by asking specific questions, such as:

  • What is the cost of living in our area?
  • Can the pastor afford to live in the nearby community?
  • Can the pastor afford activities for his children?
  • Can the pastor afford to put money aside and save for retirement?

Additional factors may include level of education, ministry experience, and job description. It is important to understand the dual tax status of ordained pastors. Uniquely, pastors are both employed and self-employed simultaneously. This means they receive a W-2 as an employee of the church, but their tax return also includes a Schedule SE because they are also self-employed. This creates a significant tax burden in which a pastor pays both the employer and employee portions of Social Security and Medicare tax, totaling 15.3%. For lay employees, churches are required to contribute the employer portion of FICA taxes (7.65%). We encourage churches to offset this tax burden for ordained pastors by shifting that same 7.65% to the pastor as a “Self-Employed Contribution Act (SECA) Allowance.” By including a SECA allowance, a church demonstrates their awareness of their pastor’s dual tax status. Geneva Benefits Group offers free call package consultations to discuss complex issues, such as SECA, cost of living, inflation adjustments, benefits, and actual net pay. These consultations are available both to pastors and sessions.

Essential Element #2: Retirement
Saving for retirement is a long-term journey. A church plays an important role in this journey by contributing a percentage of a pastor’s salary into a retirement account each month. The key is to start early and to save often to harness the power of compound interest. By starting early and saving well, an older pastor can finish his final years of paid ministry without financial stress. It allows him to fulfill various goals and transition into volunteer ministry in retirement. There are two significant tax advantages to Geneva’s 403(b)(9) retirement plans. The first advantage is that ministers can contribute pre-tax and avoid federal, state, and SECA taxes. In contrast, a pastor contributing to a Roth IRA would be required to pay federal, state, and SECA taxes. The net effect of the PCA plan is saving more and paying less in taxes. The second advantage, for ordained ministers, is that retirement distributions are eligible as housing allowance under the PCA plan. Being a 403(b)(9) retirement plan allows Geneva to authorize retirement distributions as eligible for housing allowance. These two tax advantages provide a tremendous opportunity to save more and to save on taxes. Special considerations should be made for a pastor who has opted out of Social Security. Churches and pastors should contact Geneva for advice on how to best prepare in light of opting out of these benefits.

Essential Element #3: Insurance
The essence of insurance is the mitigation of risk. Life is filled with uncertainties, such as car accidents and illnesses. Most churches simply cannot continue to support the family of a pastor who becomes disabled or dies. Protection from these risks, for both church and pastor, can be attained through the relatively low cost of insurance. A well-structured call package begins by providing health insurance, life insurance, and disability insurance. Geneva also offers both dental and vision insurance.  Geneva does not currently offer health insurance. Churches are encouraged to research group plans and the healthcare marketplace (healthcare.gov). A high deductible health insurance plan coupled with a health savings account (HSA) offers the ability to save for future medical expenses. Many ministers are able to receive substantial subsidies which effectively lower their healthcare costs.

Essential Element #4: Wellbeing
A pastor’s life is often filled with a great sense of privilege and joy, as well as times of stress and despair. The burdens of ministry can be like the constant drip of a faucet that cannot be turned off. This leads to an unhealthy pastor, an unhealthy family, and an unhealthy church. It is of utmost importance that a congregation care for their shepherd, who cares for them. This care is best provided through access to counseling, vacation time, study leaves, and sabbaticals. In 2021, Geneva, in partnership with the Center for Transformational Churches at Trinity International University, released research findings on the state of pastoral wellbeing in the PCA. The study highlights both encouraging and alarming trends. For example, over 70 percent of surveyed pastors say the demands of ministry inhibit or challenge their spiritual maturity. In response to these research findings, Geneva launched a new Counseling and Wellbeing benefit which provides a pastor with 12 fully covered counseling and/or coaching sessions annually for $15/month. This cost also includes an additional 12 sessions for a spouse and/or child(ren) ages 13-17, for a total of 24 sessions.

Conclusion
A call package does not guarantee the health of a pastor. However, consider the implications of not having a call package. A pastor may not be fairly paid and struggle to provide for his family. A pastor may become disabled and lose out on the stream of replacement income that disability insurance would have provided. A pastor may not have enough in retirement, which leaves an older pastor or his widow in dire circumstances and in dependence upon the PCA Ministerial Relief Fund. All of these unfortunate implications can be easily mitigated with a well-structured call package. A call package ensures that steps are being taken towards having a healthy pastor, a healthy family, and a healthy church. Geneva offers free call package consulting for both pastors and church sessions.

Geneva Benefits Group serves those who serve others, providing practical support for the financial, physical, and mental wellbeing of people who work in full-time ministry.

Geneva offers preparedness and peace of mind with solutions tailored to the needs of ministry leaders and staff.