Instructions for Completing Pastoral Compensation Forms (5, 6, and 7)

Transcription

1 Instructis for Completing Pastoral Compensati Forms (5, 6, and 7) Minnesota Annual Cference of The United Methodist Church 2017 Church Cference Forms Cference Office: (612) *When completed, this form needs to be sent to your district office. Please share the informati this form with your Church Treasurer. If you need assistance in setting your pastor s compensati or completing these forms, please ctact your district office. Please complete separate Pastoral Compensati forms for each appointed clergy (elder, deac, probatiary member, member of other denominati or licensed pastor) to this charge. If your pastor serves a multiple point charge, please fill out the total compensati from all charges Forms 5 and 6, and then include the breakdown for each church Form 7. Effective 1/1/2018 there are new CRSP (pensi) and CPP (death & disability) fixed amounts and maximum calculatis, these forms reflect the changes. Please use the enclosed forms for the compensati year 2018 and do not use the prior year forms as they will not accurately calculate the costs for the 2018 year. Auto-calculating form available in Excel format The Excel format versi of the Pastoral Compensati forms will automatically calculate the parsage penalty adjustment, church and clergy share of MAC premiums, pensi, disability, and total the different sectis of forms 5 and 6. If the appointment is to multiple churches, form 7 will allow you to enter the percentage for each church then automatically calculate the amounts from forms 5 and 6 for each item. This format works well for appointments without special circumstances. We hope you give it a try. Note: The Excel format will not work for certain situatis, such as appointments of clergy couples where both appointments pay a porti of the family MAC premium, and appointments without pensi and disability benefits (retired supply clergy, clergy who waived pensi benefits). It is suggested to use the Word versi for these types of appointments. Informati needed to complete the Clergy Compensati Forms: Clergy Name Years of Service Church(es) Appointment increment In quarter increments (fulltime = 1, ¾ =.75, ½ =.5, and ¼ =.25) Salary Salary reductis - (Pastor must complete line through HealthFlex Exchange for health plan; Health Savings Account ctributi, if HDHP plan is elected; and Flexible Spending Account for medical or dependent care each year. If changing the UMPIP completi of the Wespath Ctributi Electi form is required.) Housing Allowance leave blank if parsage is supplied Reimbursable amounts Ctinuing Educati, Travel, and Other Professial expenses Budget amount for parsage utilities (this ly applies when a parsage is provided) Multiple church appointments will need the percentages paid by each church. If the breakdown is not by percentage, use the Word Format instead.

2 Instructis for Completing Pastoral Compensati Forms (5, 6, and 7) Form 5 Pastoral Compensati Instructis by line: Start by entering the following informati where indicated: church name, city, clergy name, years of service, appointment increment and effective date for the compensati form. Line 1a) Pastor s Salary - Minimum Salary Requirements: Csult the Equitable Compensati Schedule enclosed for determining the years of service of the clergy pers and the required minimum base compensati. You may pay more than the minimum required. In the SPRC Training Manual, there are suggestis for setting clergy compensati. Line 1b) Parsage Penalty Adjustment: (Only added for active clergy who receive a parsage for their housing and receive pensi benefits) Legislative item 504 approved at the 2011 Annual Cference Sessi added the parsage penalty adjustment to the clergy compensati form and compensati calculati. This adjustment is designed to offset the pensi penalty of pastors who reside in parsages. Each year the penalty adjustment will be calculated by the Benefits Officer using the average housing allowance of fulltime Minnesota appointments and average parsage value (25% of salary). The fulltime parsage penalty adjustment calculati is: 3% of the difference between the average housing allowance and average parsage value. For less than fulltime appointments with a parsage the penalty adjustment will be the incremental proporti of the appointment to the fulltime penalty adjustment, 75%, or 50% Parsage Penalty Adjustment amounts are: Fulltime appointment = ¾ time appointment = ½ time appointment = ¼ time appointment = 0.00 (not eligible for CRSP pensi effective 1/1/2014) Note: Clergy waiving participati in the UMC pensi plan or retired clergy serving an appointment are not eligible to receive the Parsage Penalty Adjustment. Effective 1/1/2014 ¼ time appointments are not eligible to participate in the CRSP pensi plan per changes to the plan by General Cference Line 1) Total Salary: Add lines 1a and 1b. Line 2) Housing Allowance: For churches that provide a housing allowance in lieu of providing a parsage. The amount is determined when an appointment begins or when a pastor moves from a parsage to a housing allowance. It should not change from year to year unless there is an increase in utility costs. Even if the amount of the cash housing allowance does not change, a new housing allowance declarati is required when there is an appointment change. The housing allowance declarati of the previous pastor does not apply to the new pastor and the new pastor s housing allowance declarati from the previous church does not apply to the new appointment. The pastor may choose to shift more of their salary into their housing allowance for tax purposes, by using the Housing or Parsage Allowance Resoluti (sample forms are numbered 8a and 8b) with approval by the church or charge cference, and reporting the furnishing/appurtenance amount line 3(2) of salary reductis. Keep the approved Housing Resoluti with the church cference minutes. Lines 3 and 3a) Salary Reductis and Net Salary: Once the base cash compensati is determined, the pastor may choose to participate in voluntary salary reductis to; (1) United Methodist Persal Investment Plan (UMPIP), (enrollment or change form required) If you elect a percentage ctributi, Wespath uses the Pensi Compensati (salary + housing) to calculate the UMPIP percentage ctributi. (2) Furnishing/Appurtenance Allowance, (Resoluti must be approved by church or charge cference)

3 Instructis for Completing Pastoral Compensati Forms (5, 6, and 7) (3) Clergy Share of HealthFlex Premium plan elected (4) Health Savings Account: Only available for the HDHP HealthFlex Plans and participant elected ctributis to the Health Savings Account. (Report in Box 12 Code W W-2) (5) Flexible Spending Account: Medical and Dependent Care Reimbursement (IRC 125) (enrollment form required annually thru HealthFlex) Dependent Care amount is reported in Box 10 W-2. Please note: The amounts listed as reducti do not complete the process, enrollment line or via forms are necessary. Line 3a) Total Salary (Pre-Tax) Reductis: Add line (1) thru (5) for total salary reductis. Line 3) W-2 Taxable Wages: Calculate: Total Salary (1a + 1b same as line 1) + Other n-healthflex Plan (line 4a) Total Salary Reductis (line 3a) = Net Salary Line 3 equals the amount in Box 1 of the W2 if there are no changes during the calendar year. The 2018 ctributi limits to 403(b) plans have not been released by the IRS at this time, the limits are indexed to inflati and will be announced by the IRS in the fourth quarter of 2017.The 2017 maximum ctributi limits to 403(b) plans are $18,000 for taxpayers under age 50, and an additial $6,000 catch-up opti for taxpayers 50 and older. Each situati is unique, so please csult your tax advisor. Line 4) Health Insurance: (Church porti) The 2018 HealthFlex Exchange Plan premiums will depend the participant s during open enrollment November 1 16, The church porti has been set for 2018 at the same church share as in 2017 for single and family (more than e pers). The cference share for active clergy and lay employees will be funded from MAC Plan reserves. Automatic withdrawal is available and does save the church mey. If a mandatory classificati participant (fulltime appointment) or optial classificati that doesn t complete a waiver form, they will be automatically enrolled in the default plan in HealthFlex Exchange (C2000). The church and participant will be billed for the default. It is important that all members eligible for health coverage through the cference take acti during open enrollment. Line 4a) Other n-healthflex Plan health insurance ctributi (taxable): If the appointed pastor is not required to participate or waives participati, the church may allocate funds for n-healthflex plan insurance. This amount is taxable to the clergy. Line 5) Pensi (CRSP) and Death & Disability (CPP or UNUM) coverage: General Cference 2012 approved changes to the CRSP and CPP programs. Pensi Compensati: Compensati used to calculate pensi and death & disability programs. Parsage provided - Total Salary (line 1 which includes Salary + Parsage Penalty Adjustment) X 1.25 = Pensi Compensati Housing Allowance provided Total Salary (Line 1) + Housing Allowance (Line 2) = Pensi Compensati Pensi (CRSP) Defined Benefit: Based appointment increment 2018 CRSP Defined Benefit costs are: Fulltime appointment = $5, ¾ time appointment = $4, ½ time appointment = $2, ¼ time appointment = $0.00 (not eligible for CRSP pensi effective 1/1/2014) Pensi (CRSP) Defined Ctributi: Pensi Compensati X 2%

4 Instructis for Completing Pastoral Compensati Forms (5, 6, and 7) Disability (CPP): Fulltime and ¾ time Appointment calculati ly: Pensi Compensati X 1% with a maximum of $1, Disability (UNUM): 1/2 time appointments for Full and Provisial members (Elders and Deacs), Associate members and clergy of other Methodist Denominati. Ctact Benefits Officer at jean.edin@minnesotaumc.org for estimated premium Pensi & Disability TOTAL: Total of all CRSP, CPP and UNUM lines. The CRSP, CPP and UNUM premiums are paid by the church, and are billed by the Minnesota Annual Cference. The UMPIP is a voluntary 403(b) participant ctributi program by salary reducti. If your pastor has elected to ctribute to UMPIP the lead church will be billed separately by Wespath, and is to be paid by the church from mies withheld from the pastor s salary. Line 6) Total Compensati for this Positi: Total of lines 1, 2, 4, 4a, and 5 Less than full-time appointments: Adjustments are made to salary, housing, pensi, and possibly health insurance for less than full-time appointments. Please be in cversati with your district superintendent about your particular situati. W-2 reporting update: Health care reform and W-2 reporting informati: (From the General Board of Pensi and Health Benefits website) Background The Patient Protecti and Affordable Care Act (PPACA) requires employers to report the aggregate cost of employer-provided health care coverage employees Forms W-2. As posted previously, Notice issued in October 2010, made this requirement optial for all employers for the 2011 tax year Forms W-2 (furnished in January 2012). Final Regulatis On February 12, 2014 the Internal Revenue Services (IRS) published final regulatis ccerning the Employer Shared Respsibility Rule of the PPACA. The Final Rule gives mid-sized employers with full-time equivalent employees (FTEEs) an additial year to comply with the Employer Mandate. Under the Final Rule, mid-sized employers are not subject to the Employer Mandate until January Large employers with 100 or more FTEEs must comply with the Employer Mandate by January Most small employers with fewer than 50 FTEEs remain exempt from the Employer Mandate. For church plans, however, there was and ctinues to be transiti relief from the requirement to report the value of coverage. Thus, employers that participate in the MAC Plan do not have to report the cost of coverage the W-2 at this time. For more specific informati the PPACA visit under Center for Health, Health Care Reform or Taxable Income and W-2s: Not all the items Form 5 are csidered taxable income. The housing allowance, furnishing allowance, and fair market value of a parsage provided to a pastor are not taxable income for income tax purposes and are not included a W-2. These amounts are subject to social security tax (SECA) which the clergy reports and pays. Health and pensi benefits are not subject to either income tax or social security tax. For guidance completing W-2s, please csult the most recent Tax Packet & Tax Informati provided by the General Council Finance and Administrati. It is available their web site (

5 Instructis for Completing Pastoral Compensati Forms (5, 6, and 7) Other Pastoral Compensati Informati: Form 6 - Accountable Reimbursements A pastor must submit a receipt, invoice, or mileage log within a reasable time for reimbursement of these items. The church sets an annual budget for ctinuing educati, mileage, and professial expenses, meeting the cference minimum guidelines and the amounts are paid out when expended or invoiced. They cannot be paid as a mthly allowance. Nor can any unused porti of the fund be paid out to the pastor at the end of the year. To do so may cause the entire reimbursement plan to be taxable. Neither can an accountable reimbursement plan be set up as a salary reducti. These are funds provided in additi to the salary. Mileage is paid at the IRS rate, and does not include commuting between the home/parsage and church. Form 7 - Multiple Church Compensati and Other Expense Breakdown Using the totals from Forms 5 and 6, list the separate churches in the charge and their correspding percent of compensati and expenses then calculate each line item. Be sure to add both across and down to verify totals. Average Compensati The Denominatial Average Compensati (DAC) for 2018 is $70,202. The Cference Average Compensati (CAC) for 2018 is $64,591. These numbers are calculated by the General Board of Pensi and Health Benefits and are based cash salary plus housing allowance or parsage value (25 percent of salary). Social Security Tax Clergy are in the unique positi of paying the employer and employee share of the social security tax both their salary and housing. Some churches, in recogniti of that, seek to give their pastor a social security allowance that is csidered taxable income and must be reported the W-2. A clergy may choose to have voluntary withholding of income taxes from their paycheck, including an extra amount withheld to cover the amount due in social security tax, and the church would send the tax withholdings to the IRS with their other payroll taxes and report it the clergy s W-2. However, the church cannot directly pay the employer share of FICA/SECA to the IRS for the clergy. Forms 5, 6, and 7 must be in the district office by December 1, 2017! Modificati to Clergy Retirement Security Program effective 1/1/2014 by General Cference 2012 The CRSP defined ctributi (DC) was modified from the 3% n-matching ctributi to a 2% nmatching ctributi with a 1% matching ctributi. If the clergy makes persal ctributes of 1% or more to the United Methodist Persal Investment Plan (UMPIP) they will earn a 1% CRSP DC matching ctributi. The 2018 funding of the matching ctributi will be from pensi reserves of the Minnesota Annual Cference and not charged to the local church. The Cference Board of Pensi and Health Benefits (CBOPHB) approved the 2017 CRSP DC matching ctributi funding to encourage all appointed clergy to participate in the UMPIP program at or above 1% to receive the CRSP DC matching ctributi without adding cost to the local church. The CBOPHB will review this funding opti each year.

6 Instructis for Completing Pastoral Compensati Forms (5, 6, and 7) Equitable Compensati Schedule for 2018 The minimum base compensati for 2018 is defined as the 2017 base compensati plus the Cost Of Living Adjustment (COLA) used by the federal government for the year we are in (that is, the Cost Of Living Adjustment announced last October for 2017 SSA, which was 0.3%). In additi there is a step increase of $700 for years of service for the first 8 steps. In keeping with our going policy, the first step normally begins January 1 following 18 mths of service in the Minnesota Annual Cference. Base $36, , , , , , , , ,058 In csidering additial compensati beyd these steps noted above the Staff/Pastor Parish Relatis Committee is encouraged to csider the announced Cost Of Living Adjustment and merit increases in their mutual negotiati with the pastor. Further, this proposal does not intend to reduce current compensati levels recommended by Staff/Pastor Parish Relatis Committees and approved by the Church/Charge Cference during the going tenure of a pastoral appointment. Further, in recogniti of the financial realities and to allow for flexibility in the appointment process, exceptis to above equitable compensati policy can be approved by a ¾ vote of the Cabinet and the voluntary csent of the pastor involved. Seniority for clergy from other denominatis and communis who have had their orders recognized by the Minnesota Annual Cference shall have their seniority status established by the Cabinet before their first appointment in the Minnesota Annual Cference. The Cabinet is urged to csider years of service in the ministry exercised in other denominatis, especially those coming from the churches of the Commissi Pan-Methodist Cooperati and Uni and other member churches of the Churches Uniting in Christ (See in The 2012 Book of Discipline). Each year the Equitable Compensati Team is to submit this legislati for Annual Cference acti.

7 2018 Minimum Compensati Schedule Years of Service Calculati for Equitable Compensati Salary increments A. Budget Year B. Year pastor began full-time service in The United Methodist Church C. Subtract Line B from Line A D. Subtract 1 year (to allow for Entry Level period) E. Pastor s increment (if 0, use Entry Level period; if 9 or greater, minimum compensati is the greater of the 8th increment or the current Salary) A B. C. D. 1 E. Mthly billing for pensis is 1/12 of the Line 5 Pensi & Disability TOTAL. For example, a fulltime appointment at the DAC level, the mthly billing would look like this: Example 2018 CRSP and CPP calculatis: Compensati (DAC) = $70,202 (salary + housing value + parsage penalty adjustment if applicable) Pensi (CRSP) Defined Benefit Fulltime From table = $5, Pensi (CRSP) Defined Ctributi = $70,202 X 2% = $1, Disability (CPP) = $70,202 X 1% = $ Total CRSP and CPP = $7, Mthly Pensi (CRSP) = $ ($5, $1,404.04)/ 12 mths Mthly Disability, (CPP) = $ ($ / 12 mths) Total of CRSP and CPP = $640.63

8 Church Payment By ACH 2018 HealthFlex Plan Church Share for Active Clergy and Lay Employees (mthly & annual amounts) Church Payment Not ACH Clergy Porti Mthly Annually Mthly Annually Mthly Annually ACTIVE CLERGY - ¾ to fulltime appointment elders mandatory participati Single coverage, clergy* Family coverage, clergy* , , , , , , LAY Employees Single coverage, lay Family coverage, lay The Local church is required to fund at least the same dollar amount for single coverage for eligible lay employees as they fund for clergy single coverage. Church Payment By ACH Church Payment Not ACH Employee Porti Mthly Annually Mthly Annually Mthly Annually , , Minimum Minimum 7, Minimum Minimum 7, Local church employee benefit policy determines church share, if greater than minimum stated in this chart. (Annual Amounts) Clergy appointed ¾ to full time Family ACH Total Premium 2017 HelathFlex Plan Rates Church Porti 15,060 15,069 Clergy Porti 1, MAC Plan Rates Cference Porti MAC Plan reserves MAC Plan reserves N-ACH Church Porti 15,300 15,309 Single ACH Total Premium Church Porti 7, , Clergy Porti Cference Porti MAC Plan reserves MAC Plan reserves N-ACH Church Porti 7, , Lay employee Family ACH 16,953 Single ACH 8,029.20