Pensions for Pastors Serving churches and Pastors Employed by CRCNA H.O.

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I believe Sheri Laninga is the expert in this field and she can answer my question.

Let's use two (4 if you include the USA) examples.

a) A Pastor in Granum or Iron Springs, Alberta (where I grew up) living in a church supplied home. He will have been on the job for 40 years age 67 and his average last 5 years cash salary will be $50,000. House rental value, for Clergy Allowance calculation for CRA is $18,000. Let's leave out all non taxable allowances.

b) The Director of Canadian Ministries in Burlington, ON Living in his own house. He will have been on the job for 40 years age 67 and his average last 5 years salary will be $121,657 (level 18 mid point CRCNA salary grid agenda synod 2013). I am not sure whether a Housing allowance is included in this salary. I will assume not but stand corrected. For CRA purposes the Clergy Allowance in this case can be up to 1/3 of the salary, in this case $40,000 maximum.

What will be the pension for each if these Pastors when they turn 67 in five years?

To keep the discussion interesting lets also use two places and jobs in the USA. Manhattan, Montana for a Pastor with a cash salary and situation exactly the same as Iron Springs or Granum. Let's use ED in Grand Rapids Michigan whose salary mid point will be $151,406  and both will have been on the job 40 years and are 67 years old

In all four situations these pastors have been married their whole career, couples are healthy.

(I used males in these cases as CRCNA has not had female pastors for 40 years- just I case people trip over that issue)

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I see you have 2 threads going on this topic: <http://network.crcna.org/forums/synod/accountability-and-clarity-salary-...

The question of what party (church administers vs ministers) is compensated better, can come back potentially to bite the comparision group. At the end of the day the person in the pew can not come close to either party and ends up footing the bill. 

The following comes from <http://www.crcna.org/sites/default/files/CanadianPlanHighlights.pdf>.

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The Final Average Salary (FAS) is the average of cash salaries of ("ALL") CRC ministers serving in the three years before the calendar year in which the minister’s benefit amount is determined. A projected FAS is used for future estimate calculations.

The amount due to the retiree in most cases is the sum of the following:

·     1.1% multiplied by the FAS, then multiplied by a minister’s pensionable years of service before January 1, 1985.

·     1.46% multiplied by the FAS, then multiplied by a minister’s pensionable years of service from January 1, 1985 through December 31, 2010.

·     1.3% multiplied by the FAS, then multiplied by a minister’s pensionable years of service after December 31, 2010.

Example of pension benefit calculation

If a minister has 36.5 years of pensionable service at the time of his retirement (at age 66) on July 1, 2013, the normal benefit would be calculated as follows:

1.10% x $48,763 (FAS) x 8 years = $4,291.14

1.46% x $48,763 (FAS) x 26 years = $18,510.43

1.3% x $48,763 (FAS) x 2.5 years = $1,584.80

These total $24,386.38 per year or $2,032 (rounded) per month in Canadian funds.

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In order to compare oranges with oranges, and not apples with oranges, one also needs to take into consideration several tax planning advantages available to ministers that may or may not be available to your comparator groups, and especially not the person in the pew.

1. Pension Plan remittance: 100% paid by the local church. The practice in the public / private sector is 50% employer paid and 50% employee paid, a pension plan is provide which in many cases it is not.

2. Housing allowance: $18,000 +/- can be written off as tax deductible item which is only available to ministers, but not their parshioners.

3. Extended Health & Dental Plan: Local church usually pays 100%, whereas in the public / private sector the employer / employee split tends to be 70%/30% or 80%/20%, if an EH&D plan is provided which is not always the case.

A good "steward" would take these saving over 36.5 years and put them aside over and add them CRCNA Pension to their CPP/OAS  and/or Social Security pension payments on retirement.

They would still be better of than most of their parshioners.

My apologies for becoming inarticulate in my last two sentences in the previous post.

The second last sentence should have read "...putting them aside and adding the multipled savings to the CRCNA Pension, CPP/OAS, and/or Social Security payments on retirement."

On another matter, one needs to consider the scope of responsibility and span of control of the position when determining compensation. Making an assessment on pension payment allocation solely on job title is not helpful.

Community Builder

Since the pension benefit calculation is based on the final average salary (FAS) of all ministers at the year of retirement, salary differences between one minister and another (f they retire at the same time, same number of years of service, and service in the same country) will not be a factor in the determination of pension.

Check out the Ministers' Pension website for additional information.  An example of the pension benefit calculation is included under the Canadian Plan Highlights and the U.S. Plan Highlights located in the right column on the front page.  Call the Ministers' Pension Office if you have additional questions!

 

There is a bigger question that has not been addressed.   Is the Director of Canadian Ministries an Ordained Minister of the Word.  Currently, our interim DCM is not.  Therefore, he is not eligible to participate in the Ministers Pension Plan, a defined benefit pension plan that comes with special life benefits as well as long-term disability coverage.  In addition, his benefit program does not provide a benefit for his life and potentially the life of his spouse no matter how long either lives.

 

 

Community Builder

John B my examples assumed the jobs I used would have been filled with ordained persons. I know non -ordained people do not qualify for the ministers pension plan.  From a pension risk management point of view, the source of the FAS calculation is important. I believe some 85% of Pastors in Canada have their own house so their cash salary includes the housing allowance. Is the housing allowance included in the FAS? Where churches supply a house the cash salary would normally be a lot lower.

The salary data for the FAS calculation is taken from the annual compensation survey of all ministers both in Canada and the US.  The survey requests salary information be split between the compensation providing for housing and other cash salary.  In this way, the value of the house, either a parsonage or pastor owned, is excluded from the FAS. 

Community Builder

Thanks John and Sheri. There is a major opportunity in the ministers pension plan that needs to be attention but it will not come cheap. How would you like to join a pension scheme (let's use the CSI scheme) where your salary has deducted from it the annual value of mortgage and taxes payments?  In Canada some 80% of Pastors own their own home. The Clergy Allowance (which is strictly a tax ruling in Canada) is exactly 33.3% of  gross salary if you own a home. How does your salary survey work in that regard?  Do churches report gross salaries? Does the survey include questions on ownership? Our Pastor has all kinds of allowances (which are really part of his pay package) so if he does not claim the full amount of the allowance(s) we make a one time payment at the end of the year and that gets added to his salary. If you were to survey me and and ask about his salary I would give you the amount of his base salary because that is all I would know.   Let's say the Canadian Director of Ministries makes $125,000 and if he is an ordained Pastor, 1/3 ($41,625) of that is his Clergy Allowance if he owns his own home. But if he did not own his own home his Clergy Allowancw would be the rental value of a home in his market area which might be only $25,000 . That means his reported salary in one case would be 125,000 less 41,625 and in the other 125,000 less 25,000. How would a survey ever capture that? 

 

My simple solution is for the CRCNA, in Canada at least, to copy the CSI (Canada) pension plan and get out of the Housing Allowance calculation. As a general rule of thumb for me, Pastors' jobs have the equivalent  value of a High School principal of a school with about 300 students.

I suspect the higher priced senior positions in the CRCNA have a positive impact  (negative on cost) on average salaries. If the criteria for those jobs are "ordination" maybe we should "second" Pastors to those jobs for, say, 5 years and keep them at the same salary they were making in their congregations. The impacts would then be reversed! It does not make much sense to have a Parish Pastor double or triple his/her salary to move from Parish Pastor to HO at a position level 17+. How much money does the Pope make? His housing allowance has to be awesome, although I understand Francis has opted for a "humble" apartment.

Not certain that the comparison with school principals is strictly speaking a good example when looking at ministers versus the  administrative ED position. Many Christian school systems also have ED's that are being compensated for responsibilities greater than those of the school principal. 

If the argument is that pastors recruited for HQ administrative positions ought to be compensated based on what is being paid to those ministering in churches, it still begs the question of scope of responsibility and span of control. Secondly, pastoring a church is really not the same thing as being a school principal or school ED, let alone running the corporate entity that the CRCNA HQ in GR and Burlington has become.