Contribution Limits for 2020

The Internal Revenue Service recently announced the new pension plan contribution limits for 2020. While there are many different limits that impact pension plans, the main limits that effect participants in the Ministers’ Retirement Plan are as follows:

  • The salary reduction limit for 2020 will be $19,500. This limit is available to all participants regardless of age.
  • The catch-up contribution for individuals age 50 or over will be $6,500 per year.
  • The overall contribution limit for 2020, not taking into consideration the age 50 or over catch-up contribution provision, will increase to $57,000 annually.
  • If a participant is 50 years of age or older, his or her maximum contribution limit in 2020 will be $63,500 after combining the regular limit with the catch-up limits.

A contribution limit worksheet is available on our website for participants to use to calculate their maximum contributions for 2020.

It is important to remember that the old “20% of salary” limits are no longer applicable. Now the limits are strictly dollar limits as set out above. Further, regardless of the limits, a participant is always limited by the amount of their taxable income.

Posted in 11 - November 2019, 2019 | Leave a comment

New Changes to Overtime Rules Adopted

Many church leaders think that the “wage and hour” laws, and particularly overtime pay rules, do not apply to churches. That could not be further from the truth. Churches and church employees are NOT exempt from the “wage and hour” laws – and failure to obey such could result in substantial penalties to the church. To get around these laws, many churches have often wrongly “exempted” their employees from the law.

However, on March 7, 2019, the U.S. Department of Labor issued “proposed” regulations concerning who will be eligible for overtime under the Fair Labor Standards Act (FLSA). These new regulations, finalized by the Department of Labor on Sept. 24, 2019, will take effect on Jan. 1, 2020. It is expected that the new regulations will have a substantial impact on churches and other non-profit entities.

Before reviewing the changes in the regulations, it is important to understand the foundation of the Fair Labor Standards Act. The FLSA requires that workers be paid the federal minimum wage (or a higher wage if the local jurisdiction or state has mandated such) for the first 40 hours worked in a regular work week. Further, for any hours worked past 40 hours in a regular work week, the FLSA requires that most employees be compensated at time and a half of their regular hourly wage.

To be exempt from this “time and a half” overtime pay rule, the employee has to be classified as an executive, administrative, or professional employee – often called the “white collar” exemptions. Each category of exempt employees is defined specifically under the FLSA. However, not only do you have to meet the definition for an executive, administrative, or professional employee, but previously you had to be paid a salary of at least $455 a week ($23,660 for a full-year worker). Under the new regulations that will go into effect on Jan. 1, 2020, the minimum salary threshold to be an exempt worker increases to $684 a week ($35,568 for a full-year worker).

For example, assume that a church has an employee, such as the director of the church’s daycare, that they have designated as being exempt under the Fair Labor Standards Act as an “executive” because the person supervises more than two people, her position is primarily managerial, and she has genuine input into the job status (hiring, firing, promotion, etc.) of the employees she supervises. This person has been making $32,000 a year and averages working 50 hours a week at the church. Since the new regulations do not go into effect until Jan. 1, 2020, the church is currently in full compliance with the law. However, after January 1, this person, even though they remain an “executive” and can be paid a salary, must be paid “time and a half” for any hours worked over 40 hours in a regular work week, simply because her annual base salary does not meet the new minimum annual salary of $35,568.

With the new rules, it is important to remember the following:

  • An employee, whether classified by the church as exempt or not, can be paid a salary and still be subject to the new overtime rules.
  • Even a worker that meets the criteria of being designated an executive, administrative, or professional employee must be paid overtime (time and a half) if they are compensated at less than $684 a week after Jan. 1, 2020.
  • Overtime for this purpose is considered to be any hours worked in excess of 40 hours in a regular work week.

Any time there is a change to the overtime rules, there are always questions about the applicability of the new regulations to ministers. In other words, if a minister works more than 40 hours in a week and does not make more than $35,568 in taxable income in a year, will a church have to pay the minister time and a half?

Currently, there is no clear, specific answer to this question in the regulations, but the answer seems to be no. While ministers are not statutorily exempt from FLSA requirements, several courts over the years have found that clergy are exempt under the “ministerial exemption” – in other words, ministers performing religious functions are excluded from the definition of employees under the FLSA. The Department of Labor in a 2005 opinion letter seemed to recognize this exemption as well.

Should you have questions about the applicability of these rules to your employees, it is recommended that you check with a qualified employment attorney and seek professional advice regarding your situation immediately.

Posted in 09 - September 2019, Pay Roll Taxes, Tax Information | Leave a comment

Court Finds Housing Allowance Constitutional

In a surprising unanimous decision on March 15, 2019, the Seventh Circuit Court of Appeals held that the ministerial housing allowance did not violate the U.S. Constitution.  While Court observers were divided on their predictions about what the court’s final decision might be, the unanimous decision upholding the “cash” housing allowance took almost everyone by surprise.

“For both active and retired ministers, we could not have gotten, or even hoped for, a better decision.  There is no doubt that prayer made the difference in this situation.  So, we rejoice with our ministers in this incredible victory,” stated Arthur D. (Art) Rhodes, President and Chief Executive Officer of the Church of God Benefits Board, Inc.

The plaintiffs who brought this case, an atheistic organization called Freedom From Religion Foundation, stated that they are considering their options, now that the appellate court has ruled against their claim that the ministerial housing allowance violated the Establishment Clause of the First Amendment. Potential options include seeking a review of the decision by all members of the Seventh Circuit Court of Appeals or seeking an appeal to the U.S. Supreme Court through a writ of certiorari.  The chance of success under either option is very limited. Within 90 days or so, the losing party will have to exercise their preferred option on how to proceed regarding this latest decision.

The most likely option will be for the plaintiffs or a similar group to file a new lawsuit in another jurisdiction with the hopes of getting a more favorable decision.  It would most likely take several years for a new lawsuit to work its way through the legal system.

The current case, Gaylor v. Mnuchin, only dealt with the “cash” ministerial housing allowance paid by churches whose pastors either rent or own their own homes, as well as ministers in retirement who are drawing from a “church” retirement plan, such as the Ministers’ Retirement Plan of the Church of God.  The same challenge to the parsonage allowance (where a church provides a church-owned home for the pastor’s use) was dismissed early in the litigation due to a technical issue.

The Church of God International Office and the Church of God Benefits Board – the administrator of the Ministers’ Retirement Plan – were very active in fighting for the ministerial housing allowance, filing a legal brief at the appellate court along with some 40 other denominations and retirement plans.

“It is certainly evident that the Seventh Circuit looked very closely at the law supporting the ministerial housing allowance that has been in place for more than 60 years.  They also looked at the impact that disregarding that legal precedent would have on both active and retired ministers of the Gospel.  So, while this battle is certainly not over, we thank all those who have been praying for this result,” noted Dennis W. Watkins, legal counsel for the Church of God and a member of the Board of Directors of the Church of God Benefits Board.

Additional information on the litigation involving the ministerial housing allowance, along with a copy of the court’s recent decision, can be found at https://www.benefitsboard.com/housing-allowance.

Posted in 03 - March 2019, 2019, Ministerial Housing Allowance | Leave a comment

Board Manuals Updated for 2019

With each New Year comes new rules, new regulations and new contribution limits. Therefore, all the Benefits Board’s free educational manuals have been updated to take into consideration all relevant changes for 2019. You can access the latest version of each manual from the Benefits Board website. The topics covered are:

All manuals are available without cost and may be used by the local church and church officials to address the everyday issues most churches face. Please forward any questions or comments about the manuals to info@benefitsboard.com.

Posted in 01 - January 2019, 2019, Informational Manuals | Leave a comment

Benefits Board Partners with ChurchEXCEL

The Church of God Benefits Board recently announced a new partnership with the Evangelical Council for Financial Accountability (ECFA) through ChurchEXCEL.  ChurchEXCEL is a FREE online resource portal that provides expert knowledge on church finances, policies, procedures, administration, and so much more!

At the Benefits Board, we understand how overwhelming and complex church financial management and administrative work can be.  We also understand the struggles and frustrations involved.  That is why we are excited to bring you this wealth of FREE information and materials to help you excel in ministry.  We have a heart to see our leaders thrive and hope to provide you with as much assistance as possible through ChurchEXCEL.

Many of the eBook resources are available in English, Spanish, and Korean.
To start taking advantage of this opportunity and all the FREE benefits ChurchEXCEL has to offer, visit ChurchEXCEL.org/BenefitsBoard.  You can also access the ChurchEXCEL site through the Church of God Benefits Board site, www.benefitsboard.com.

Posted in 11 - November 2018 | Leave a comment

Impact of Tax Reform Bill on Ministers and Churches

NOTE: Please see information below about new online calculators and W-4 Forms from the IRS. Also, join us at 2:00 pm ET on Thursday, March 8, 2018 for a one-hour live webinar on the Tax Reform legislation.

As we have discussed earlier, Congress ended 2017 by passing the largest tax bill in over 31 years. While some call this tax reform, most would say that it was just tax legislation in that the Tax Code remains as complicated as ever. On the positive side, the Benefits Board, with assistance from some of our Administrative Bishops and pastors across the country, was able to make substantial in-roads on protecting many of the tax provisions that dealt with our retirement plan and ministers in general.

Highlights of Tax Reform 

While this is very complicated legislation and contains provisions that will not be fully understood for months and maybe years to come, below is a list of just a few of the highlights of the bill that impact ministers and churches:

  • Outside of a few provisions, the bill only applies after January 1, 2018 (and therefore does not apply to tax returns that are filed in 2018)
  • There are seven tax brackets, ranging from 10%-37% (formerly 10%-39.6%)
  • Standard deduction (married filing jointly) increased from $12,700 to $24,000
  • Personal exemptions ($4,050 per person) were eliminated
  • Child tax credit was enhanced
  • State and local tax deduction limited to $10,000
  • Mortgage interest limited to houses valued below $750,000
  • Home equity interest is no longer deductible unless used for acquisition indebtedness
  • No miscellaneous itemized deductions allowed now which necessitates that ministers should have an accountable reimbursement plan to be able to take advantage of the tax savings
  • Qualified moving expenses paid by an employer is now taxable income – and moving expenses paid by an individual are no longer deductible. Further, there is no exclusion for overseas transitions
  • Section 529 plans can now include elementary and secondary education up to $10,000 per year.

Impact on Charitable Giving

There has been much discussion about the impact of the tax reform bill on charitable giving. Most of the discussion is speculation at this point. However, because the standard deduction has been increased so drastically, many former itemizers will no longer find it advantageous to itemize – and end-of-year giving will most likely drop off. Consider these statistics according to Charity Navigator:

  • 31% of annual giving to churches and non-profits occurs in December.
  • 12% of annual giving to churches and other non-profits occurs on the last three (3) days of the year

Some have emphasized that donors to churches give not to just get a tax break but out of a commitment to God and the church. While it is agreed that such is true during regular giving cycles, the end-of-the-year giving seems to be primarily dependent upon getting a charitable deduction.

Due to the potential drop off in giving at year-end because of the new tax bill, it is suggested that churches, state/regional offices, and other non-profits plan their annual budgets without the historical December “bump.” For many churches, giving in December increases some 50% over an average month. It would be wise not to plan for such an increase in coming years.

Tax Withholdings

Since the individual tax rates changed effective January 1, 2018, all withholding amounts for employees should be reviewed immediately. The Internal Revenue Service has issued several tools to help in this process:

  • Withholding Tables – on January 11, 2018, the IRS released Notice 1036 (https://www.irs.gov/pub/irs-pdf/n1036.pdf) that provides details on withholdings under the new tax tables.
  • Online Calculator – on February 28, 2018, the IRS released an on-line calculator to allow employers and employees to check withholding rates to make sure such is correct. You can access the “withholding calculator” at https://www.irs.gov/individuals/irs-withholding-calculator.
  • New W-4 – also on February 28, the IRS issued new W-4 withholding forms. Since the old W-4s were based upon personal exemptions that were eliminated by the new legislation, the new W-4s (found at https://www.irs.gov/pub/irs-pdf/fw4.pdf) should be used for all new employees and for change in status (marriage, new child, change in dependents, etc.) of current employees.

All church treasurers and pastors should pay close attention to the changes required by the new tax legislation. If not, such could result in either over-withholding or under-withholding of tax liability. Further, the Internal Revenue Service has given notice that they plan to make further changes involving withholdings over the coming months and even into 2019. Therefore, it is important that you stay aware of impending changes.

Posted in 03 - March 2018, 2018, Internal Revenue Service, Tax Information | Leave a comment

Potential Impact of Tax Reform on the Church & Ministers Webinar

In the Know LIVE Webinar

Thursday, March 8th
2:00 – 3:00 PM EST

Topic: Potential Impact of Tax Reform on the Church and Ministers

Join us on Thursday, March 8th at 2:00 pm EST for a free, one-hour, informational webinar hosted by the Church of God Benefits.  Led by Art Rhodes, President and CEO of the Benefits Board, the webinar will give an overview of the new Tax Reform legislation as it relates to ministers and churches.  The legislation is very complex, but we will highlight the greatest areas of concern for ministers as individual taxpayers, as well as the potential impact of the bill on charitable giving to churches.  A lot of information will be discussed during the presentation, including ways that you can potentially lower your tax liability.

Space is limited so reserve your spot today!

Simply click on the following link https://zoom.us/webinar/register/WN_IfRNzrX3T7C7Z3xmDtMSFQ and follow the instructions for registration.  Once registered, you will receive a confirmation email containing access information.  Any specific questions you would like addressed during the webinar can be sent to webinar@benefitsboard.com.

 For more information, please visit our website at www.benefitsboard.com.

Posted in 02 - February 02, Webinars | Leave a comment