Saturday, October 14, 2006

On opting out of the Social Security system

As I mentioned the other day, a recent NY Times article has reminded me that I need to address the question of opting out of Social Security.  Think of this as an issue related to, but not directly a part of, negotiating terms of call.

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
  • Medicare
  • Medicaid
  • Welfare
  • 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 you can claim violation of conscience to all of the above, and you are ordained, then you should apply for exemption from SECA contribution.

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.

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Saville said...

Thanks for this post and the clear explanation, Ed. I had heard about this exception, and as a Canadian who is just beginning ministry in the U.S., have been wanting to look into it. This makes the issue clearer for me.

Anonymous said...

What do you think about a minister taking the exemption but declaring before his session and presbytery what he will use the 15% for? For example, if a minister planned on using half of the money for personal savings and the other half for giving to those in need, I would applaud his decision. He's doing something with the money that's much better than what the government will/would do.

How do you feel about that ethically?


Ed said...

Tom, I'm not sure I fully understand the question. If you mean that the rationale for taking the exemption is that he believes he's doing something better with the money than what the government would do, then I would say that misses the point. The rationale for taking the exemption, according to the law, must be that he has a conscientious objection to the programs themselves-- not simply a disagreement with how well or poorly they execute their mission.

On the other hand, if he has a conscientious objection and therefore takes the exemption, what is next is largely up to him. In that case, I too would commend him if he determined to use a portion of the money for those in need. He certainly should invest some of it in some way-- which is something I'll talk about in a future post.

I guess my position on this case, ethically, is that simply claiming that he could do a better job than the government does not constitute a conscientious objection to public insurance. On the other hand, if a true conscientious objection exists, then good stewardship with the liberated funds would be expected, and at the same time commendable.

Anonymous said...

Okay, I think I get what you're saying.

Correct me if I'm wrong but it seems like it's as simple as "Social programs are not the role of the government" as being the basis for the rejection. So if you're not a hyper-libertarian, you can't take the exception.


Ed said...

You've got it, Tom-- with one further qualification: your conviction that social programs are not the role of the government must be borne out of religious principles.

Anonymous said...

I think that this post is well written but I did think that it misses the point in a few key areas. I thought that the article over-simplified the issue too much. For example, by using the words "would your conscience be violated if you participated in any of these:"
the article seems to portray that Social Security money is only used for those purposes.

A simple evaluation of the Social Security system shows that it does not operate as simply as you state Ed. While the programs themselves seem noble, their execution is far from it. The Social Security surplus no longer exists in this post-Reagan era that has seen the raid of Social Security coffers by government spending programs.

In reality, the money paid into Social Security could be used in any number of evil ways. Tax payer funded abortions, euthanasia of the elderly, embryonic stem cell research, and promotion of the homosexual agenda being taught to our children in public schools. These are just broad strokes of the evil ways Social Security tax money can be used.

As such, I choose to exercise my conscience in not receiving benefits from programs that have evil implications despite their seemingly innocuous veneer. Do some funds from Social Security tax pay the benefits of current retirees? Yes. But make no mistake, the government currently brings in more with the program than it pays out to the same beneficiaries. That surplus is not saved for future expenditures, it is spent in the same tax year. So are a portion of your Social Security tax dollars going into the programs that perpetrate evil I mentioned? Most certainly.

I hope this sheds more light on what is a very complex topic and one that requires thorough prayer and reflection. I thank you for your insights Ed. I simply wanted to offer a different perspective on the topic that I believe is still God-honoring and allows ministers to exempt themselves from the system with a clear conscience and within the IRS guidelines.

(To note, I personally have never received benefits from any of the listed programs. However, my objection to receiving the benefits remain the same. I do not believe it is right for me to receive those benefits from the government for the work that I do as a minister. I believe the Lord will provide for my ministry in ways that honor Him.)


Craig said...

Thanks man, very helpful. Should be given to every newly ordained.

Jason said...

I have studied and studied this issue since I was ordained. I came to the conscientious decision that I SHOULD opt out of Social Security. Three passages of scripture led me to this decision.

First, 2Thess 3:6-15. Paul urges all to work for their food. If you don't work you do not eat. This seems to suggest, as Paul uses himself as the example, that a social welfare system is against scripture especially for those in the ministry. If you are able to work - you work for your food and give generously to the church. If you are a widow or orphan, the church, not the government steps in to help you in your time of need (James 1:27). This passage also indicates, although much stronger in other passages, that a church is to take care of their elders (pastors) not the government.

Second, 1 Cor 9. Paul emphasizes here the importance of the church taking care of the elder (pastor) and his needs. Verse 9 and 10 specifically say, "For it is written in the Law of Moses, 'You shall not muzzle an ox when it treads out the grain.' . . . The plowman should plow in hope of sharing the crop. If we have sown spiritual things among you, is it too much if we reap material things from you." Again, the church, not a government welfare agency is to provide for the elder of the church (pastor).

Thirdly, 1Tim 5:17-18. Again this stresses the role of the church to take care of their pastor, not the government.

I believe a key phrase in IRS form 4361 is "for services I perform as a minister or as a member of a religious order." This is repeated at least twice on the form. I do believe it would be biblically inappropriate for a minister to accept social welfare as he is employed by the church since scripture is so clear that it is the church's role to meet the needs of the elder - he is counted worth of double honor! Honestly, I think there might be a lack of trust on the minister's part to stay "opted in" to social security. That is entirely a different post. In other words, if I work at Walmart, there is no agreement, nor mandate, that Walmart has to take care of me. If I get sick - they can fire me. If I die - they have no obligation to my family. If I become disabled - that is my problem (unless workman's comp activates). Therefore, I have no conscientious objection to pay into Social Security for a "secular" job. In that case, I have no "church" to meet my needs. However, there is a clear scriptural mandate, as seen above, for churches to take care of those that "preach and teach the word."

If I leave the ministry, I will pay into social security and make no complaint. I will also collect the benefits that I have already paid in from my secular employment - I see absolutely no problem with that. However, I do not believe it to be appropriate for the government to take the role of the local church to provide social welfare for me and my family - this is the church's job.

God is our YHWH Jireh - the God Who Provides. We need not trust in man nor in man's social systems for our provision. Men, we should be leaders in our home and lead our families in fiscal responsibility. We should be diligent like ants to store up for the winter and to meet our family's needs - not rely on the government to step in and take care of us. I have a clear plan. I have a retirement plan (that my church pays into) I have health insurance (that my church pays for), I have disability insurance (church and personal), and I have investment insurance (personal).

I hope it all made sense. Feel free to comment if you have questions or comments. Thanks much, Jason