Whether you’re a church or a nonprofit, if you employ an RCA minister of Word and sacrament, you have a hand in the minister’s retirement plan, insurance benefits, and even taxes. Find all the information and forms you need here.
Requirements for employers
As a way of ensuring that pastors are cared for and appropriately compensated, the RCA’s Book of Church Order (BCO) spells out the minimum benefits that employers must provide to ordained ministers. In the form used for calling a minister, Formulary No. 5, churches make promises to pay a pastor adequately; make contributions to the RCA retirement plan; provide life, long-term disability, and medical insurance; and offer opportunities for professional development.
BOBS annually sets the minimum standards for insurance coverage that employers must meet or exceed. Health-share plans don’t meet the BCO requirements. If a minister’s spouse carries the insurance, the church should cover the cost of the insurance premiums.
Long- term disability and group life insurance
Both ordained and commissioned pastors actively serving at least 17.5 hours per week are provided with employer-paid group life and long-term disability (LTD) insurance benefits. Read more about life and LTD insurance in the RCA.
Retirement account contributions
For full-time ministers, employers must contribute at least the amount of the Effective Buying Power per Household (EBPH) or 11 percent of compensation, whichever is greater. For part-time ministers, the EBPH amount does not apply; the annual contribution is calculated as 11 percent of the salary. The EBPH amount for 2020 is $7,061 and the EBPH for 2021 is $7,106. Use this calculator to determine your church’s contribution.
The BCO requires a minimum of one week per year, plus a stipend of at least 1/52 cash salary for the study program.
Under certain circumstances, part-time ministers may be exempt from benefits. This is also true of Canadian ministers. According to the Book of Church Order (Chapter 1, Part 1, Section 2, Article 7):
A consistory shall fulfill the provisions of the call form (Appendix, Formulary No. 5) for retirement and insurance for all ministers serving the church under call or contract unless (a) regarding retirement, the minister is covered by the retirement plan sponsored by the Regional Synod of Canada or the retirement plan of the communion where the minister’s membership is held, (b) the classis determines that the minister is serving the church part-time, as defined by the Board of Benefits Services, and that circumstances warrant that the consistory be exempt from this requirement, or (c) the minister is serving less than part-time as defined by the Board of Benefits Services.
If this applies to your employee, complete a Benefit Exemption Form.
Annual Insurance and Retirement Benefits Information
Wouldn’t it be great if your pastor could focus more on ministry and less on worrying about finances? We think so, too. Every year, BOBS puts together a guide to help ministers and churches understand the ins and outs of retirement and insurance benefits, the Annual Insurance and Retirement Benefits Information (AIRB) guide. The guide helps churches comply with the requirements set out in Formulary No. 5. It provides the most up-to-date information about insurance and retirement so your church can keep its promises to your minister.
Enrolling a new employee
Adopt the RCA’s 403(b) Retirement Program
Before your employees can enroll in the RCA 430(b) Retirement Program, you must have an RCA 403(b) Adoption Agreement on file, and all contributions must be consistent with it. The Agreement outlines the contribution formula, eligibility and special requirements for its participants. It is an important legal document to ensure the adopting employer is compliant with the RCA 403(b) Retirement Program Plan Document.
The agreement should be updated whenever the information contained in it becomes outdated.
If you don’t have the agreement on file, please complete the RCA 403(b) Adoption Agreement according to the Adoption Agreement Instructions, then return a copy to BOBS and keep the original in your files.
Who is eligible to participate in the RCA 403(b) Retirement Program?
An RCA minister is eligible and required to participate when serving an RCA church or institution. Lay employees and non-RCA ministers are eligible to participate when serving an RCA church or institution with the written authorization of their employer.
Complete the Participant Information Form
To enroll an employee in the RCA 403(b) Retirement Program, BOBS needs to set up the employee in the Fidelity system. Please complete the Participant Information Form for each eligible participant and return it to BOBS. BOBS will use the information to set up the RCA 403(b) account and will notify the employer once the process is complete.
Fidelity will send an enrollment package to new participants for beneficiary designation, salary deferral elections, and investment information.
For full-time ministers, employers must contribute at least the amount of the Effective Buying Power per Household (EBPH) or 11 percent of compensation, whichever is greater. For part-time ministers, the EBPH amount does not apply; the annual contribution is calculated as 11 percent of the salary. Find the most current EBPH amount in the 2020 Annual Retirement and Insurance Benefits Information guide (AIRB). If you are looking for a past EBPH amount, find it in that year’s AIRB (linked above) or look through the EBPH history, 1987-2015.
Use this Employer Contributions Calculator to determine the proper contribution. Keep in mind that the IRS sets limits on how much can be contributed to a retirement account. Be sure to check the IRS website for this year’s contribution limits.
Salary deferral elections
Participants can contribute pre-tax dollars to their account by deferring part of their salary.
Participants are encouraged to change their salary deferral elections online through their NetBenefits account. BOBS receives the weekly salary elections activity report from Fidelity and notifies employers about the elections made by their participants during the week. The employer then makes the necessary adjustments in the payroll system.
Alternatively, participants can complete a Salary Reduction Agreement and give it to the employer directly for processing. For compliance purposes, please return a copy of the Salary Reduction Agreement to BOBS each time a new election is made.
Ensuring correct contributions
To ensure that all ministers are receiving sufficient contributions to their retirement accounts, BOBS conducts the Retirement Program Contribution Verification Project. Annually, we request salary information from churches to verify that the proper amount is being contributed to the retirement account of each pastor. The request for information is sent to church as part of the Consistorial Report Form (CRF). Churches, classes, and other RCA employers are responsible for bringing these payments up to date.
Setting up contributions
Make contributions to your employee’s retirement account online using Fidelity’s Simplified Contribution Platform (SCP). This is an enhanced, simple, secure process for submitting 403(b) contributions.
If you need help, contact the Fidelity SCP team at 800-917-4369 or SCPhelp@fmr.com.
Group medical insurance is available through the Reformed Benefits Association (RBA). The RBA is a nonprofit corporation established by the Reformed Church in America and the Christian Reformed Church in North America. The RBA offers a variety of group medical insurance plans as well as group life insurance, vision, dental and additional supplementary plans. Ministers who work at least 20 hours per week may enroll in medical insurance through the RBA.
Though you’re not required to enroll your employee in an RBA plan, any alternate medical insurance must meet or exceed the minimum standards that BOBS sets. (Health-share plans don’t meet the BCO requirements.) If a minister’s spouse carries the insurance, you should cover the cost of the insurance premiums.
Basic life and long-term disability insurance
Employers must provide basic life and long-term disability (LTD) insurance to ordained and commissioned pastors actively serving at least 17.5 hours per week. LTD covers up to two-thirds of an employee’s income if he or she becomes injured or sick and cannot work for an extended period of time. Employees are automatically enrolled in life and LTD insurance with Unum. (Note that employer-paid life insurance coverage over $50,000 is a taxable benefit to the employee; see “Imputed taxes” below.)
Churches are billed on a quarterly basis for their ministers’ life and LTD insurance. To determine the monthly premium, use the Group Life and LTD Premium Calculator, which includes the current rates.
Payment can be made through direct debit (ACH) or by credit card, using the link on your invoice.
To sign up for ACH (Automated Clearing House) payments, complete the Direct Debit Authorization Form.
Employer-paid life insurance for coverage in excess of $50,000 is a taxable benefit to the employee benefiting from the coverage. The Internal Revenue Code section 79 provides an exclusion for the first $50,000 of group-term life insurance coverage provided under a policy carried directly or indirectly by an employer. The imputed cost of coverage in excess of $50,000 must be included in income, using the IRS Premium Table, and are subject to Social Security and Medicare taxes. Use this calculator to determine the dollar amount that should be entered on the W-2 form.
Voluntary life insurance
Ordained and commissioned pastors enrolled in group life insurance may also enroll in employee-paid voluntary life, spouse life, and child life insurance benefits. Your employee may enroll in voluntary life insurance only when he or she is first eligible for benefits or during an annual open enrollment period.
Long-term care insurance
BOBS no longer administers long-term care (LTC) insurance. If your employee has a question about an LTC policy, they should contact Unum directly at 866-679-3054.
Mental health benefits
Through the Employee Assistance Program (EAP), BOBS makes free counseling available to active and retired RCA ministers, denominational staff, missionaries, and their households. Pine Rest Christian Mental Health Services provides three free confidential Christian counseling sessions per issue either in person or online. This benefit comes at no cost to you, the employer.
A housing allowance is the most significant tax benefit that clergy receive. Ministers can claim a housing allowance whether they pay for their own housing or live in a parsonage. (Retired ministers and, in some cases, commissioned pastors, are eligible to claim a housing allowance, too.) The minister is responsible for estimating the amount of housing allowance, but the employer (in the case of a church, the consistory) must approve the housing allowance with an official “board resolution.”
“The compensation for Rev. _________ shall include $_________ per year designated as housing allowance. This designation shall be effective until modified by the church board.”
A sabbatical is a time for pastors to focus on things that are important to their work and life with the church. Though not required, sabbaticals for pastors are highly recommended in order to renew the calling and creativity of our spiritual leaders. Such sabbaticals should include intentional times for reflection, rekindling the spirit, and deepening spiritual life and family relationships. BOBS recommends a sabbatical every five years for a period of two to four months.
Clergy compensation checklist
The compensation you provide to your employee goes beyond the salary, retirement, and insurance benefits. BOBS has created a simple checklist to begin thinking about a compensation package when negotiating the terms of a call.
Ending an employee’s service
The status for RCA ordained ministers will remain active until the classis officially declares them retired. Ministers who are planning to retire soon should contact their classis clerk. BOBS will send them a retirement kit after receiving the retirement notification from the classis.
If your lay employee or non-RCA ordained minister retires or is terminated, you will need to complete the Participant Retirement/Termination Notification Form and return it to BOBS. This is required for the participant to access their retirement account.
Upon retiring or being terminated, your lay employee or non-RCA ordained minister cannot remain insured through BOBS. Their medical and long-term disability (LTD) insurance will terminate upon their retirement date. They may continue their life insurance directly with Unum by converting or porting their insurance within 31 days.
Taxes and other information
Church reporting guide
The ECFA is a trusted partner and resource for best practices in ministry finance. Their annual reporting guide is comprehensive, accurate, and accessible. To understand your tax responsibilities as the employer of a minister, read through their guide, Church Reporting Made Easy.