Minister's Compensation Package

Why A Compensation Contract Is Important

Understanding the importance of a compensation contract can sometimes be difficult. Most churches and ministries create pastoral compensation plans based only on the cash it can pay the minister, and taxes are not taken into consideration. Church boards are unaware that there is a proper way to structure compensation so that it can be earned tax free. Learn how to ensure that your pastor or minister qualifies for the maximum benefits allowed under the law. With these benefits, the pastor can keep more of the money he or she earns and can plan for a stable retirement, too.

Take Advantage Of The Special Rules For Minsters

There are more than 12 different ways to customize a minister's compensation package to take advantage of the special tax, insurance and retirement benefits that are available. Additionally, if your church runs a school, teachers can qualify for the same tax benefits as the minister.  Every possible scenario, from the Housing Allowance to a tax free retirement plan, is calculated to create the best possible package for each individual.

How Much Should We Pay Our Pastor and Employees?

The new IRS Compensation Initiative, which is designed to audit minister compensation packages, makes deciding how much to pay your pastor and employees difficult and dependant on many factors. Unfortunately, the IRS does not give us any guidance on how to do it.  For that, we turn to the courts to see how they have ruled in the past. According to the most recent court cases, we are to factor the church's budget, the pastor/employee's job description, number of hours dedicated to the job, how the job propels the church or ministry's purpose and other relevant factors when determining reasonable compensation. We have discovered that churches are unaware of how to properly structure compensation packages in order to receive full tax benefits. These benefits also reach into retirement to provide years of tax free income. Furthermore, we can also help you include past years of uncompensated work into the compensation package to make it legal.

What About Section 4958 Requirements?

Under Section 4958, the IRS has been given the ability to assess intermediate sanctions on churches who do not have appropriate compensation documentation.  Many people believe that Section 4958 was created to ensure that compensation packages not be too excessive. This is not the case. This provision was created to ensure that compensation packages be properly documented  and reported to the IRS for tax purposes. Under this code, even the smallest gap in documentation will result in stiff intermediate sanctions of up to 200 percent under Treasury Regulation 53.4958-4(c)(1). The severity of these sanctions need to be respected, as many ministers and churches will go under the IRS microscope in the near future.

Do you ever wonder if the church can legally pay for the pastor's cell phone, car or gas? Do you ever wonder how to properly allot for love offerings? Do you know whether or not a provision can be added to the pastor's compensation contract to take care of his or her spouse? Can you enter into a voluntary withholding agreement or even a retirement plan? Let us help you turn these questions into reality.

We Create The Minutes Of Your Board Meeting To Approve The Package

After we create a compensation package for you, we will write a full set of minutes and resolutions for you to properly implement the package.  Section 4958 requires that an accurate set of minutes be kept, and that they clearly indicate which board members voted on the compensation package and which did not.  It also requires documentation noting that the salary recipient(s) recused him/herself from voting on it.

Some of the Most Important Clauses That We Include In Your Compensation Agreement

• Church Rights and Responsibilities
• Agreement Duration and Renewal and Termination
• Cost of Living Adjustments
• Deferred Housing Allowance Plan for Retirement
• Cell Phone Use Agreement
• Pastoral Professional Development Clause
• Insurance Protection
• Spouse Protection Clause
• Accountable Reimbursement Agreement
• Section 280(c)(1)(a) Home Office Deduction Clause
• Vacation Time
• Section 105 Medical Reimbursement Agreement
• Job Description
• Minutes Approving compensation
• and more