ND District Salary Guidelines 2015 for Pastors Adopted by the ND District Board of Directors August 2015

NEW FOR 2015 The North Dakota District LC-MS 2015 pastor salary scale reflects a 3.3% Cost of Living Adjustment (this may vary slightly due to rounding) increase over 2014. There was no bump in the base salary. The oil boom has increased the cost of living in many parts of the state. While a 3.3% COLA reflects inflation across the entire country, it may not reflect the higher cost of living in your community. Congregation treasurers and employees have received information concerning 2015 Concordia Plan premiums and new options for the Concordia Health Plans. You may stay in your current option. Each employer is asked to make an “active selection” of their health care option for 2015. This means that each employer is asked to fill out a form indicating their selection and return it to Concordia Plans. This is a change from past years where if an employer took no action they would automatically keep the same option for the coming year. Changes were made to the Concordia Retirement Plan during 2014 which have direct impact on many workers and employers. One of the major changes is the elimination of the offset payment to those participating in the Retirement plan on the regular basis. Congregation treasurers and employees receive regular mailings from the Plans describing these changes. This information is also available on line at www.ConcordiaPlans.org. Congregation leaders must take the time to learn about these changes and how they affect their workers and their local budgets. OTHER SALARY CONSIDERATIONS These guidelines are written with ministries where a sole pastor serves a single congregation in mind. In North Dakota, this is becoming less common. Dual, triple, multi-staff congregations/parishes, and other configurations need to adapt the guidelines to fit their unique circumstances and workload. One way to adapt the guidelines is to use a multiplier to differentiate the uniqueness of the local ministry. For example, to differentiate the role of the senior pastor from other pastors on staff, a congregation could choose to increase his salary by a set percentage (a multiplier). The same method could be used in cases where a pastor is serving more than 1 congregation. The use of a multiplier would acknowledge the extra time needed for travel, preparation and more official functions. Some pastors are ordained following a rich personal history of church related vocations. In these cases, consideration may be given to crediting the pastor with extra years of experience. He should keep in mind that if he accepts another divine call in the future that the new congregation may not grant those extra years. UNIQUE TAX STATUS OF PASTOR A pastor is considered an ordinary or common law employee by the IRS for income tax purposes. But, with respect to Social Security taxes, ministers of the Gospel are treated as self-employed. Selfemployment tax (SECA) is roughly the equivalent of both the employer’s and employee’s social security and Medicare contribution. Virtually all cash paid to a worker by a congregation is subject to SECA tax. If a congregation provides a parsonage, the fair rental value of the parsonage (even though no cash has exchanged hands between the worker and congregation) is subject to SECA tax. If a cash housing allowance is paid, the worker pays SECA tax on the housing allowance paid.

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ND District Salary Guidelines 2015 for Pastors Clergy taxes are complicated. Competent tax advice should be sought as questions arise. These guidelines are not a substitute for such advice. The LCMS Congregational Treasurer’s Manual provides information on IRS reporting requirements and payroll issues. It is updated annually. Clergy are not subject to mandatory income tax or FICA/Medicare tax withholding. They make estimated quarterly tax payments. Voluntary withholding is permissible. But, both the pastor and the treasurer need to develop a very good understanding of how such voluntary withholdings are reported to the IRS in order to avoid IRS questions. Income received from honorariums for funerals, weddings, etc. is subject to yet additional IRS rules. Tracking and reporting these types of income to the IRS is not the responsibility of the congregation. Clergy income is reported to the IRS via a W-2 form. It is the responsibility of congregational leadership to insure the W-2 is reported to the IRS in a timely manner and copies supplied to the pastor before January 31 of each year. Again, the LCMS Congregational Treasurer’s Manual provides examples of how to fill out a pastor’s W-2. CONCORDIA PLAN SERVICES (CPS) Concordia Plan Services consists of three different benefit programs: the Concordia Health Plan (CHP), the Concordia Retirement Plan (CRP) and the Concordia Disability and Survivor Plan (CDSP). The premiums charged for these plans are dependent upon the marital and family status of the pastor. Each of these Plans has its own premium. Each premium appears separately on the monthly CPS bill. Concordia Plan Services communicates directly with the worker and the congregation (employer). The ND District guidelines do not attempt to describe every option, coverage, premium, change or nuance available through Concordia Plan Services. Congregation leadership and, of course, those workers covered by CPS are expected to read, understand, and follow the rules and guidelines of CPS.

LC-MS Concordia Health Plan Concordia Health Plan (CHP) is the ND District’s preferred health insurance provider. It offers employers several new health insurance options for 2015. Employers may be able to lower their premiums depending on the option they choose. Unfortunately, lower premiums for the employer may mean higher out-of-pocket expenses for the worker. Congregations should discuss options with their workers and consider sharing the premium savings with their workers if the option chosen results in higher out-of- pocket expenses for the worker. Employers choosing health insurance from another provider should carefully compare coverages. Concordia Health Plan includes prescription drug, dental, vision and mental health benefits. “Cheaper” health insurance premiums from “outside” insurers are appealing; but, such insurance may not provide the worker complete coverage. For instance, a worker who is in all three Concordia Plans and who becomes disabled will have their health insurance premiums waived after 6 months of disability until they reach retirement age. If an employer is not in the Concordia Health Plan at the time a worker becomes disabled, this health insurance premium waiver is lost unless that specific coverage has been purchased through a separate program.

AUTOMOBILE EXPENSES Auto use for ministry purposes should be reimbursed. Discussing the mileage needs of the ministry in advance will help avoid misunderstandings and budget surprises. Ministry/business mileage is reimbursed at the IRS rate per mile driven. As of this writing (July 2014), the IRS mileage rate is 56¢. The 2015 mileage rate will be announced near the end of 2014. Using this method, the pastor records all pastoral miles driven during the month and then submits them to the treasurer for

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ND District Salary Guidelines 2015 for Pastors reimbursement. The IRS has specific rules on how mileage logs are to be kept. Mileage reimbursements using this method are not subject to income or self-employment taxes. In some circumstances, Pastor – member confidentiality may need to be protected. Pastor, Elders, and treasurer should determine before the fact how these situations will be reported on the reimbursement form. If a flat monthly auto allowance is provided in lieu of mileage reimbursement, this method may result in income and SECA tax liability depending upon actual business miles driven annually. A flat auto allowance is reported as taxable income on the pastor’s W-2. The worker must maintain adequate records to show business mileage in order to deduct these dollars from his income when he files his personal IRS 1040. CONVENTIONS & CONFERENCES Conventions and pastor conferences, including monthly circuit meetings (winkels) are required by Synod. They are considered integral to a congregation’s ministry. They are not “days off”. Meals, lodging, registration fees and other related costs are legitimate business expenses and should be paid by the congregation(s). HOUSING & UTILITIES Every parish is expected to provide for the worker’s housing needs. Parsonage provided When a congregation provides a home, all utilities are paid by the congregation excluding personal long distance telephone costs and other items of a personal nature/choice. Lawn care, snow removal, routine house maintenance, cable TV, etc. should be discussed to determine who provides the necessary equipment, does the work and pays the bill. Charges for premium or add-on services (movie channels, call waiting, etc) should also be discussed prior to their installation. Congregation leadership should assure that the parsonage reflects well on the congregation within the community and provides the pastor and his family a modern, comfortable, well-maintained home. Trustees need to regularly inquire as to the home’s condition and make necessary repairs and updates. The parsonage family’s privacy should at all times be protected. This means no unannounced inspections or repairs. The parsonage family should view the parsonage as a trust deserving of their care and respect. Permission should be received prior to making changes/improvements. While the parish should not attempt to prescribe how the pastor and his family live in the parsonage, discussing matters (such as adding pets) helps avoid conflict. The parsonage, when vacated, except for normal wear, should be in a condition similar to when it was first occupied. Pastors are required to pay self-employment tax (SECA) on the fair rental value of a parsonage (see the LCMS Treasurer’s Manual for a definition of fair rental value.). Normally, this means that the Pastor pays SECA tax on the fair rental value of the parsonage from his cash salary. Housing equity If the parish provides a parsonage, they should consider adding a Housing Equity Allowance to the pastor’s salary. This annual amount roughly equates to equity the pastor would earn as a homeowner and can be used as a down payment on a home in the future. It should be treated as ordinary income. The pastor should be encouraged to save this allowance for a down payment on a house in the future.

Pastor buys or rents housing A Cash Housing Allowance may be added to the pastor’s salary in lieu of the congregation providing a parsonage. This amount should be sufficient to cover the rent or mortgage payment, utilities, property taxes,

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ND District Salary Guidelines 2015 for Pastors insurance, and other necessary costs of home ownership in the community. Review this allowance annually so that it remains adequate. The cost of almost everything goes up each year. A housing allowance set in 2008 does not cover the expenses of 2015. The worker is required to pay self-employment tax (SECA) on all cash housing allowance dollars. (For example: A $1,000 per month cash housing allowance, after paying the SECA tax, leaves about $860 for actual housing expenses.) IRS Housing Allowance Resolution Traditionally, a pastor’s total compensation is comprised of his salary as reflected on the district salary scale and a cash housing allowance or the fair rental value of a parsonage. IRS regulations require congregations to annually designate a portion of the pastor's total compensation as a Housing Allowance so that the portion of his earnings used to provide housing may be excluded from income tax. The Housing Allowance Resolution does not involve paying additional dollars to the pastor. It is simply a designation for income reporting purposes which allows the pastor to exclude that portion of his compensation/earnings which is used to provide housing from income tax. These dollars are not reported as taxable income on the worker’s W-2. He must be prepared to verify to the IRS that the amount designated by the Housing Allowance Resolution was, indeed, used for housing costs. The congregation must pass a Housing Allowance Resolution before the pastor can begin to take advantage of this tax benefit. Sample Resolutions and a more thorough explanation of this tax benefit are in the Congregational Treasurer's Manual. Pastors living in a parsonage are also eligible for this “tax break”. While not making house payments or paying utilities, a pastor living in a parsonage might purchase furniture, pay renter’s insurance, buy cleaning supplies or incur other related expenses which are eligible. The dollar amount designated in the IRS Housing Resolution might actually be larger than the cash housing allowance paid to a pastor. The IRS Housing Resolution is calculated using both salary and cash housing allowance. SECA TAX ALLOWANCE A pastor pays both the employer and employee’s share of Social Security/Medicare taxes (SECA). This amounts to roughly 7.65%. Both the cash salary and housing allowance (or fair rental value of a parsonage) are included in calculating this tax. The IRS does allow for some adjustments to lower income prior to calculating the tax. Congregations are encouraged to help pay the employer portion of this tax by adding a SECA allowance to the pastor’s compensation. This allowance is a mixed blessing. These dollars help pay the SECA tax while at the same time being included in the calculations for both income & SECA taxes. OPTING OUT OF SOCIAL SECURITY The IRS allows ministers to opt out of Social Security within the first two years of entering the ministry. The reason for opting out must be theological. The Lutheran Church- Missouri Synod does not oppose participation by its ministers in Social Security on the basis of religious principles. LCMS pastors seeking exemption from Social Security must discuss their choice with the district president prior to filing for exemption.

PROFESSIONALISM - PERSONAL NEEDS A pastor’s responsibilities cannot be squeezed into a regular schedule or a 40 hour work week. Many of his evenings, weekends and holidays are consumed by ministry activities or unexpected needs of members.

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ND District Salary Guidelines 2015 for Pastors Weddings (including premarital counseling), funerals (family visits, prayer and funeral services), hospital visits and other pastoral care cannot be scheduled by the pastor for his convenience. He is on call 24 hours a day, 7 days a week. Even dealing with phone calls (some which are critical and necessary and some which aren’t) from members while at home is an intrusion which blurs the lines between work and leisure. Also, there are times (Lent for example), when the pastor spends more time than normal preparing and carrying out the public ministry. The need for time to rest and to re-create is Scriptural. A pastor and his Elders and/or Church Council need to discuss this important matter. Striking a balance between ministry and relaxation is the pastor’s ultimate responsibility. He should not abuse this privilege; neither should the congregation deny him this freedom. Personal time off for sickness, funerals, and other emergencies should not be counted as vacation time or as the pastor's day(s) off. The congregation should have a policy in place prior to such a need arising. If there are no sick pay/ benevolence pay/family leave policies or guidelines in place, the congregation should be prepared to be overly generous when these situations arise. VACATION The pastor should discuss his vacation plans well in advance with the appropriate church board so that the congregation has adequate time to arrange for pastoral care and pulpit supply during his absence. Also, agree as to who is responsible for making these arrangement. The pastor and congregation should mutually define what constitutes a vacation day. It is also good to set a policy as to whether unused vacation days may be accrued for use the following year. And, lastly determine who keeps the official tally of vacation days available/used. Vacation days should be prorated for the first calendar year of service to a congregation. Years of Experience is calculated using all years of LC-MS ministry regardless of location. All calendar days are counted as vacation days. Legal holidays occurring within a vacation period are not counted as vacation days.

YEARS OF EXPERIENCE 0-5 years 6-14 years 15+ years

CALENDAR DAYS 21 days 28 days 35 days

SUNDAYS 3 Sundays 4 Sundays 5 Sundays

If you have questions or would like to visit with your circuit visitor about compensation and benefits, please contact him. Questions may also be directed to Mr. William Sharpe at 701 293 9001 or [email protected]

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ND District Salary Guidelines 2015 for Pastors Years of Experience

Year of Graduation

Baptized membership up to 300

Baptized membership 301-600

Baptized membership 600+

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39

2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976

$37,512 $37,823 $38,443 $39,063 $39,578 $40,925 $42,165 $43,406 $44,643 $45,885 $47,124 $48,386 $48,511 $48,673 $48,799 $48,923 $49,047 $49,171 $49,294 $49,419 $49,543 $49,605 $49,667 $49,730 $49,791 $49,853 $49,914 $49,977 $50,037 $50,103 $50,161 $50,225 $50,286 $50,348 $50,410 $50,472 $50,534 $50,596 $50,720 $51,340

$38,567 $38,877 $39,497 $40,118 $40,738 $41,977 $43,218 $44,458 $45,699 $46,937 $48,173 $49,419 $50,658 $51,898 $53,139 $54,378 $55,620 $56,240 $56,859 $57,479 $58,100 $58,720 $58,844 $58,968 $59,091 $59,215 $59,402 $59,589 $59,668 $59,754 $59,835 $59,928 $60,021 $60,113 $60,207 $60,301 $60,394 $60,486 $60,569 $60,672

$39,621 $39,930 $40,552 $41,172 $41,815 $43,031 $44,273 $45,963 $46,753 $47,993 $49,232 $50,472 $51,713 $52,953 $54,189 $55,432 $56,673 $57,913 $59,154 $60,396 $61,636 $62,254 $62,874 $63,495 $64,114 $64,735 $65,353 $66,097 $66,186 $66,223 $66,347 $66,595 $66,688 $66,781 $66,874 $66,967 $67,090 $67,214 $67,338 $67,462

40

1975

$52,117

$60,878

$67,587

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