Social Security, and other programs covered under the Federal Insurance Contributions Act (FICA), are normally divided in cost between employer and employee. In other words, if you are a standard employee working for any company or institution, your employer is required to pay half of your portion of this "tax". Ordained ministers, however, are considered self-employed when it comes to their status under tax law, and therefore aren't covered under FICA-- instead, they are under the Self Employment Contributions Act, or SECA.
This means that they pay the full amount of their contribution to these federal assistance programs. For instance, at the school where I work, 7.65% is deducted from my paycheck to cover my FICA contribution; another 7.65% is paid on my behalf by the school. The same rate, however, applied to an ordained pastor (or anyone else who was considered self-employed under tax code) would be twice that: 15.3%.
Because of this, many pastors consider it a strong financial move to opt out of their SECA contribution-- something that is allowed to ordained clergy almost exclusively (a few federal positions are afforded the same benefit). Many others choose to do so because they believe that the Social Security system is a "bad investment"-- in other words, they think the system will go bankrupt before they themselves are able to reap any benefit for it, and therefore prefer not to participate.
In order to apply for exemption from SECA contributions, ordained pastors must complete IRS form 4361, entitled Application for Exemption from Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners. This application must accompany tax returns no later than the second year in which you earned income under that status; if it is not received by then, you cannot apply for exemption. Also, the application is exactly that; it will be reviewed by the IRS and can be approved or rejected at their discretion. In other words, you aren't exempt simply because you filed an application. (Find out more about the IRS regulations concerning Social Security and other SECA constituencies through IRS Publication 517.)
The title of the application, however, should suggest to you that those who opt out of SECA contributions for purely financial reasons may be amiss in their decision. This option is provided to clergy for a very specific purpose: it acknowledges that some may have particular religious convictions that governmental financial assistance is wrong in all cases. It must be a conscientious objection to the very concept of governmental aid, not unlike conscientious objection to military service.
Thus, while it may certainly be the case that you object to governmentally-controlled healthcare, or that you think that a government-run retirement program is probably a bad idea, you must go further than that. Can you, in good conscience, claim that your conscience would be violated if you participate in any of these:
- Social Security assistance
- Disaster relief
- Government-guaranteed student loans
- Government-funded student grants (such as the PELL Grant)
- Food stamps
- Low-interest natural disaster-relief loans
- FHA or HUD housing loans
If, however, your opposition to these programs is not rooted in your faith-informed conscience, you are lying if you apply for exemption. In this case, you should not apply; if you do, you should be brought up on charges before the body that ordained you.
I'll go one step further: if you have received the benefit of any of these programs, I would challenge your decision to apply. Why? Because your receipt of benefit through a program that you now claim you have a conscientious objection to constitutes, if not hypocrisy, then at least an inconsistency that may hinder your credibility. It also suggests that your mindset is not the community-mindedness that Scripture requires of us.
Here's an example: while in seminary, Marcie and our children qualified for a program called WIC (Women, Infants, and Children) through which we received a lot of free food. The program was designed to ensure that those under a certain income level could provide their children with a healthy diet. We were one family of literally dozens in seminary with us who qualified for, and accepted, aid through this program. (By the way, we've also benefited from student loans, student grants, FHA housing loans, and Medicaid since we've been married.) If I were to now claim a conscientious objection, at very least I would be suggesting that other seminary families should not receive the same assistance that I received, even though they may have the same or greater need for assistance.
Opting out of the Social Security program is a good option for those who qualify. If, like me, you don't qualify, please don't taint your ministry or the option for future pastors by applying. In truth, very few will qualify, if we take seriously the legal implications (penalty of perjury) and ethical implications (deserves to be defrocked) of the restrictions stated on the application.