Minimum Compensation Guidelines for Priests
These guidelines are the minimum requirements for each congregation. There is nothing to prevent congregations from providing compensation and benefits higher than those mandated. Indeed, the Trustees Compensation Committee is aware that in some circumstances, the minimum requirements may not be adequate. Each congregation is urged to review the guidelines in light of their individual circumstances (without going below the mandated requirements).
Priest and lay leaders of congregations who are negotiating a compensation package for a newly called priest, or making changes to an existing package, are urged to consult with the Controller’s Office to ensure that the package is calculated in accordance with these guidelines and with all relevant laws and regulations.
A functioning Microsoft Excel spreadsheet is available by clicking here, to assist you with your calculations.
Cash Stipends Values
Equity Replacement When housing is provided
Surviving Dependent Housing
Payment toward self-employment Tax Liability
Maternity and Paternity Leave of Absence
Calculation Formula for Total Value of Compensation to be assessed by Church Pension
Travel mileage reimbursement
Letter of Call
Disability Insurance and Compensation Continuation in the Event of Disability
Social Security/Self Employment Tax
Section A. Mandated Compensation, Benefits and Associated Expenses
Pursuant to the following requirements mandated by Diocesan Convention, each congregation within the Diocese of New York shall provide the following compensation with benefits to each priest who works 20 hours or more per week and meets the Internal Revenue Service (IRS) criteria for employees (see Treasury Reg. Sec. 31.3401(6)(b)), provided no congregation shall employ any person not eligible to work in the United States. The following requirements are mandated by convention, and apply to all full time priests and priests working 20 hours or more.
Annual Stipend The annual stipend shall be no less than those amounts listed on the attached Schedule I. Stipend minimums should be figured proportionately for priests working part time. All priests receiving compensation are to be issued a W2 form for tax purposes. See also Stipend Increases.
Housing Congregations shall either (a) provide housing or (b) pay a housing allowance which shall not be less than 50% of the priest's annual stipend. No congregation shall be excused from providing this benefit (i.e., either (a) housing or (b) a housing allowance of not less than 50% of the priest’s annual stipend) because housing is provided to the priest from another source. See Schedule III for computation of church-provided housing, and also Equity Replacement When housing is provided and Surviving Dependent Housing
Payment toward self-employment Tax Liability Each congregation shall pay additional compensation to the priest equal to one-half of the amount the employer FICA and Medicare tax would be due on the stipend and housing above. Use the spreadsheets available on the Controller’s office page of the diocesan website to calculate the payment toward the SE tax obligation.
Health Benefits Congregations shall pay 100% of the premium costs for adequate medical and dental coverage for their priests and their dependents. The Health Maintenance Organizations (HMOs) offered through the Episcopal Church Medical Trust are considered adequate medical coverage. (Note: The congregation is not required to contribute more than the HMO rate for medical insurance.) The dental plan offered through the Episcopal Church Medical Trust is considered adequate dental coverage.
- Maternity and Paternity Leave of Absence
Congregations shall provide their priests, both female and male, with a paid leave of no less than seven weeks upon the birth or adoption of a child.
Pension Every cleric receiving compensation must be enrolled in the Church Pension Fund and the congregation must accurately report the compensation and pay the pension assessment. See Schedule III.1 for information about pensionable compensation.
VacationCongregations shall give their priests one month, including five Sundays, of paid vacation each year. Vacation time does not accrue, and must be used in the year it is earned.
Travel The congregation shall reimburse the priest at the current IRS rate for the reasonable and necessary costs of transportation and travel for required church business, including trips to the seat of the Diocese, after receiving from the priest adequate documentation of such costs. See also Travel mileage reimbursement.
Continuing Education Annual time allotted by each congregation to its priests for continuing education shall not be less than ten days, and expenses shall be a distinct budget line, set at a minimum of $500. The benefit is to be used only for continuing education (and is not to be used in pursuit of any other purpose or as additional cash stipend). Time not used in one year is not to be carried over; however, money not used in a given year is to be set aside in a special account, and may be used in future years as needed (up to three years), either for continuing education or to help fund the priest's sabbatical. Any such funds carried forward do not reduce the congregation's obligation to budget $500 in continuing education funds in each and every year. (See also Funds for Continuing Education of Clergy)
Moving Expenses All congregations shall pay a specific dollar amount for the moving expenses of newly called priests. The exact amount must be negotiated between the congregation and the priest, and included in the Letter of Call. The Deployment Office of the Diocese is available for advice on this issue.
Letter of Call Every congregation that calls a priest must issue a Letter of Call. This letter should articulate the congregation's goals and provide for an annual Mutual Ministry Review. An outline of a Letter of Call and procedures for conducting a Mutual Ministry Review can be obtained from the Deployment Office.
Disability Insurance and Compensation Continuation in the Event of Disability.
Short-term disability(a) The Church Pension Fund provides short-term (up to 12 months) disability coverage for medically certified disability for all clergy for whom pension assessments are being paid. If a priest is not canonically resident in a diocese of the Episcopal Church, and the Church Pension Fund therefore cannot receive pension assessments for that person, the congregation is required to purchase from Church Life Insurance Corporation the same coverage provided by the Pension Fund for clergy of this Church.
(b) In the event a priest has a disabling condition, and if the priest is eligible for short-term disability coverage from the Pension Fund, the congregation is required to maintain full salary and benefits for the first six months of disability. The congregation receives the payment from the short-term disability insurance as a reimbursement of salary expense.
(The previous two paragraphs as approved by resolution of the Standing Committee, April 2009.)
Long-term disability and disability retirementAs soon as it appears that a disability will be continuous and total, the priest should apply to the Church Pension Fund for a disability retirement. While not obligated to continue compensation and benefits after six months of disability, congregations are urged to make a priest’s transition from active service to disability retirement as smooth as possible.Because disability pensions will not fully replace current income, it is strongly recommended that priests serving congregations consider, as part of their personal financial planning, obtaining long-term disability insurance through an organization such as Church Life.
Section B. Other Items Strongly Urged by Convention
Stipend Increases An annual review of the priest's total annual compensation is strongly urged.
Equity ReplacementWhen housing is provided, each congregation is strongly urged to offer a plan for equity replacement, which is to be no less than 3% of what the cash housing allowance would be. This amount must be matched by the priest, and is invested in a 403b tax deferred annuity.
Life Insurance While the life insurance provided to all active clergy enrolled in the Church Pension Fund meets the minimum requirement, each priest and congregation should review the adequacy of this coverage.
Surviving Dependent Housing Every congregation is strongly urged to provide short term housing of the dependents of a deceased priest.
Sabbatical A sabbatical is strongly urged for all priests since it benefits both them and the congregations they serve. A sabbatical is not vacation time and should not be confused with vacation time. A minimum of 2 weeks of sabbatical for each year of service is recommended so that 3-4 months may be taken at the time of sabbatical. A sabbatical should be within every 7-year period of service with the congregation. During the sabbatical, priests will receive full compensation and benefits, as outlined in Section A. Unused sabbatical time will be forfeited.
Click here to download worksheet.
Schedule II: Travel mileage reimbursement
The Diocese uses the guidelines set forth by the Internal Revenue Service (IRS) for reimbursement of travel mileage
by Diocesan employees.
1. Calculation Formula for Total Value of Compensation to be assessed by Church Pension:
Note: The following, given for informational purposes, is taken from The Church Pension Fund’s publication A Guide to Your Benefits Now and in the Future. It is available to all clergy and congregations at 1-800-223-6602 or at www.cpg.org.
As a basis for the pension assessment, clergy compensation consists of cash salary, Social Security tax reimbursements, utilities, and housing.
Cash salary is the stipend paid, including bonuses, one-time cash payments, tuition paid for dependents, severance and any salary reduction used to fund an annuity or other tax-deferred benefit, such as a TSA or 403(b) plan.
Social Security tax reimbursement (SECA) is compensation provided to offset self-employment taxes.
Utilities are allowances to cover the cost of utility bills, such as fuel, gas, and electricity, or the amount the church pays for utilities on a cleric's behalf.
Housing is the allowance clergy receive for this purpose:
If housing is provided rent-free, the housing allowance is assumed at 30% of the total of the cash stipend, Social Security reimbursements, and utilities.
If both housing and meals are provided free of charge, the housing allowance is assumed at 40% of the total of the cash stipend, Social Security reimbursements, and utilities.
If clergy receive a housing allowance, for pension purposes the allowance is assumed at the actual cash allowance or 30% of the total of the cash stipend, Social Security reimbursements, and utilities, whichever is greater.
If housing is provided rent-free and clergy receive an additional cash housing allowance or housing equity allowance, for pension purposes the allowance is assumed at 30% of the total of the cash stipend, Social Security reimbursement, and utilities. The total compensation is then calculated to include both the assumed 30% housing allowance and the actual cash housing allowance or housing equity allowance.
If clergy receive compensation from more than one church employer, but only one provides housing, compensation from all of qualified employers is assessed for a proportionate share of housing.
2. Social Security/Self Employment Tax:
The Department of the Treasury, Internal Revenue Service (IRS) publishes Publication 517 Social Security and Other Information for Members of the Clergy and Religious Workers. This publication can be obtained at no charge by calling 1-800-TAX-FORM (1-800-829-3676) or www.irs.gov.
The following is an excerpt from Publication 517 provided to remind the clergy of the income subject to Self-Employment tax. --
"To figure ... net earnings from self employment, include in gross income:
- Salaries and fees for your qualified services,
- Offerings you receive for marriages, baptisms, funerals, masses, etc.
- The value of meals and lodging provided to you, your spouse, and your dependents for your employer's convenience, and
- The fair rental value of a parsonage provided to you (including the cost of utilities that are furnished) and the rental allowance (including an amount for payment of utilities) paid to you.
If a church pays any amount toward your income tax or self-employment tax, other than withholding the amount from your stipend, it is income to you. You must include the amount in your gross income and self-employment income."
Note: for Social Security purposes, clergy are considered self employed. For income tax purposes, clergy are considered employees and should receive a W-2. (See also Clergy Tax Considerations.)
You may use the spreasheet shown in the right hand menu of this page (scroll up) to assist you with your calculations or contact the Controller’s Office.
Church Law & Tax Report: Church & Clergy Tax Guide
Richard R. Hammer, J.D., LL.M., CPA
Christian Ministry Resources
PO Box 2600
Big Sandy TX 75755