How Much Vacation Should a Pastor Receive?

Here is my latest article over at the Christian Broadcasting Network's website:

Without any hesitation or doubt, I believe that pastors should be given a generous amount of paid vacation or personal leave time.

While in seminary, I worked in the credit card and, later, mortgage departments of an international bank. Within three months of my employment, I was already receiving 18 days of paid time off (PTO) every calendar year (not including holidays). This wasn’t because I was special in any way. It was just their standard policy for all employees. That was three-and-a-half weeks of paid vacation! By the time I left, I was entitled to 23 days of PTO – nearly five weeks!

Now, think about that from this perspective: that was for a job that never once called me in the middle of the night because of an emergency; that never once had me in tears over someone’s pain or sinful choices; that never once asked me to stand at the bedside of a dear friend to watch him take his last breath; and that never once was going to require me to answer for the souls of the people we served.

If there was ever an employee in the history of the world that should be given generous time off, it has to be a pastor.

As an additional thought on this, consider the fact that pastoring is not a normal “40 hour/week” kind of job. In a very real sense, it never ends. There are no days off from loving your people and being concerned about them. There is no vacation from one’s responsibility to care for their souls. Again, if there was ever a “job” that should be provided with as much PTO as possible, it has to be the job of a pastor.

So, be generous with the paid vacation time you provide for your pastoral staff. You have no idea how much they need it.

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To read more about benefits pastors should receive, pick up a copy of my book, How to Not Be a Broke Pastor!

Listen to what readers are saying:

"Really liked this book. Highly recommend it for anyone who is working through the maze of non-profit pastoral finances. There is not enough help subject and this book is a very needed addition in this regard. The book is enjoyable, well outlined, and makes a complex subject easy to understand." - Ilya

Reader Question: Would a pastor benefit from a QSEHRA?

A pastor recently contacted me and asked:

Is there really no way for a church to reimburse a pastor for his health insurance premiums that he pays through one of the Obamacare marketplaces?

Well, you've asked a great question . . . a complicated one . . . but a great one. So, I'll try to simplify the answer as best as I can.

When the ACA was originally passed, all employers with 50 or more full-time equivalent (FTE) employees were required to provided health insurance for their workers. Employers with less than 50 FTE were not required to provide insurance. Subsequently, many small employers dropped health insurance coverage. However, the ACA also closed up a loophole that might have allowed these small employers to offer a reimbursement for their employees monthly premiums that they purchased on their own. No employer, regardless of size, could either pay directly or reimburse employees for health insurance that they purchased on their own. This has been the law up to Jan 1, 2017.

However, at the end of 2016, Congress passed the 21st Century Cures Act which does allow small employers (those with less than 50 FTE) to offer a QSEHRA - Qualified Small Employer Health Reimbursement Arrangement - that does allow them to reimburse employees for individually purchased health insurance premiums . . . as long as they meet all of the requirements and follow the rules/guidance appropriately. Technically, the law went into affect on January 1, 2017, but the guidance needed to operate such a plan was just released at the end of October.

Unfortunately, this will probably not help most small churches or their pastors.

Here's how it works. The only way the church can legally reimburse a pastor for his health insurance is by establishing a QSEHRA (my assumption is that reimbursements outside a QSEHRA are still prohibited). However, if they establish a QSEHRA, it must be offered to all qualified employees and must be solely funded by the church.

In addition, and this is the REALLY BAD PART, the value of any reimbursements a pastor receives from the QSEHRA must be reported to the IRS, and the value of those reimbursements will reduce (by an equal amount) any subsidy he receives from the marketplace.

To make that clear, let's say that, based on Pastor Bob's current income and family size, his health insurance (purchased through the marketplace) cost $2000/month, but his subsidy was $1800/month . . . leaving him with $200 to pay out-of-pocket for his insurance on a monthly basis.

If, next year, his church established a QSEHRA that reimbursed him $500/month for his premiums, and if everything else stayed the same, Pastor Bob's health insurance would cost $2000/month, his subsidy would be reduced to $1300/month, and his reimbursement from the QSEHRA would be $500/month . . . leaving him with $200 to pay out-of-pocket for his insurance on a monthly basis.

The only thing the church's reimbursement does is reduce the amount the government will pay in subsidy. It will not reduce the pastor's out-of-pocket expense. Again, apart from a QSEHRA, any reimbursements are, to my knowledge, prohibited.

Stacy Potts is a pastor, author, and consultant specializing in pastoral compensation and personal finance issues. He is the author of multiple personal finance books for pastors including How to Not Be a Broke Pastor and The Pastor's Guide to Wise Investing. He lives in Virginia Beach, VA, with his wife, Jamie, and their two children, Nathaniel and Hannah. Visit his website at www.brokepastor.com.

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The Right Way to Give a Christmas Bonus to your Pastor

An excerpt from Structuring Pastoral Compensation:

Over the years, I have received numerous gifts from our church. Some were for Christmas, others were for anniversaries, and others were just because they loved us.

In fact, I just celebrated my 10th anniversary as the lead pastor of our church. They were very kind to us, and surprised us with a party. Many people brought cards and notes thanking us for our ten years of service. It was touching, and we were so honored.

It has been my observation over the years that most churches love their pastors. While they may not yet have every component discussed in this book as a part of their pastor’s total compensation package, they do genuinely want to care and provide for their pastor in practical and monetary ways.

One of the most common ways this is done by many churches is through the giving of bonuses or gifts to pastors either on special occasions (i.e. an anniversary) or around holidays (i.e. Christmas).

While this can be a great way to love and care for your pastor, a few things need to be said about bonuses and gifts.

Source of Funds

Before giving a bonus or gift to your pastor, you must first determine where these funds will come from. You have two likely options.

Bonus/Gift from the Church’s General Fund

One option is to simply give the bonus or gift directly out of the church’s general fund. No special collection of funds would be taken for this. This is the simplest, and as you will see in a moment, best method for such gifts.

Bonus/Gift Collected by the Church

Unfortunately, the more common method for coming up with the funds for these kinds of gifts is by the church taking up a special collection or “love offering” specifically for the gift. People just write a check to the church and designate it towards the gift. What could be easier?

Maybe . . . money laundering? I say that, mostly, to get your attention, but understand that this is practically (and inadvertently) what ends up happening in many churches.

Any gift given to a church that is specifically designated as being for the personal enrichment of any individual is generally NOT considered a tax-deductible or charitable contribution. Many people and many churches do not know this . . . which causes the transaction to become, in effect, an example of religious “money laundering." I’m being a bit facetious, but I hope you get my point.

If a church really wants to take a collection for its pastor, it should first notify the congregation that all funds given will not be tax-deductible and will not appear on their annual giving statements at the end of the year.

For this reason, I believe that the best method for giving bonuses or gifts is simply to do so out of the church’s general fund.

Tax Considerations and Reporting

However, regardless of which method above is used, any bonus or gift given to an employee of the church must usually be reported as taxable income for the year.

For example, Pastor Bob has a total income of $50,000 of which he designates $25,000 as being his housing allowance. The church makes a 5% contribution to his SEP totaling $1,250. However, at Christmas, the church decides to give Pastor Bob a $2,000 Christmas bonus to show their appreciation for his service.

Two things will most likely now need to happen: A) because the $2,000 is considered salary, the church will likely need to make an extra $100 contribution to Pastor Bob’s SEP (5% x $2,000 = $100); and B) the church will likely need to show a total salary of $27,000 on Pastor Bob’s W2 at the end of the year.

What Does All of This Mean for You?

It means that churches have a responsibility to rightly handle these kinds of gifts, both in respect to your donors and to your pastors/employees. Do not engage in well-intentioned but, nonetheless, unethical practices.

However, I would encourage you to make it a regular feature of your church’s care for your pastors to give them these kinds of gifts. It shows the pastor and his family that the church cares for them in a very practical way.

Not all gifts have to be cash-based (though, if it is a gift that has a known, tangible value, the value will very likely still need to be reported as salary.) Again, I have found that what pastors want most is to be remembered, thought of, and appreciated.

I’ll never forget my five-year anniversary at our church. As the day arrived, I didn’t expect or hope for any kind of monetary or non-monetary gift. All I wanted was a hug and a “thank you.” Not because I felt that I deserved to be thanked . . . but just because I wanted to know that our people remembered me.

So, let me encourage you to remember your pastors – love them, show them you care, remind them often of what a blessing they are to you. You will never know how much that truly means.

Stacy Potts is a pastor, author, and consultant specializing in pastoral compensation and personal finance issues. He is the author of multiple personal finance books for pastors including How to Not Be a Broke Pastor and The Pastor's Guide to Wise Investing. He lives in Virginia Beach, VA, with his wife, Jamie, and their two children, Nathaniel and Hannah. Visit his website at www.brokepastor.com.

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Sincere Gratitude for a Generous Church

It's been a little over two months since I launched Brokepastor.com. In some ways, it's gone exactly as I expected, and in other ways, it's not gone anything like what I expected.

One of the unexpected aspects of this endeavor has been the number of pastors I've heard from who, without complaining, have shared with me how their respective churches either can not, do not, or will not meet their financial needs. Please note the three categories I just gave.

I've heard from some pastors who shepherd churches that can not support them financially. Many of these churches are very small, and the pastors who serve them are often bi-vocational. I'm sure that, in many of these cases, the churches are doing all they can, and I have nothing but respect for both the pastors and the churches that fall into this category.

Unfortunately, I've heard from other pastors who shepherd churches that do not support them financially. The issue isn't, necessarily, the church's ability to financially support their pastor; it's often simply that no one is thinking about it. It's as if the pastor's financial needs have been forgotten by the church, and there are many pastors out there who feel uncared for by their church in this area.

Worst of all, I've heard from pastors who shepherd churches that will not support them financially. In at least one case, this has been a "power play" by certain leaders within the church (likely) to get the pastor to resign. In other cases, this is the reflection of an ungodly attitude that seems to believe that pastors should be poorly paid in order to keep them humble and faithful to God.

While I have many thoughts on each of these categories that I will probably share in future posts, talking to all of these various pastors has made me even more grateful for the church I pastor. Just last night, our church members voted on next year's operating budget. Included in that budget were very generous raises for myself and our other full-time pastor.

Don't get me wrong. It's not the money that I'm thankful for. It's the heart of our people who always seem to ask, "How much can we do for our pastors?". The kind people of our church are models of how a church should seek to treat it's pastoral staff, and I am sincerely grateful to God for them and for their obvious and practical love for me and my family.

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Why every pastor should receive disability insurance from their church

While fairly standard in the secular workplace, disability insurance coverage does not seem to be as common amongst pastors and churches. Yet, the possibility of a pastor becoming disabled is no less than any other worker in any other profession, and churches should be ready to care for any pastor who becomes disabled - either directly or through the purchase of disability coverage.

Notice the two options I just gave for caring for a disabled pastor (I’m assuming that a church not providing care for a disabled pastor isn’t one of their options. How unloving, uncaring, and un-Christlike would that be?).

One option is for the church to care for a disabled pastor directly – meaning, the church is willing and able to keep that pastor on its payroll (at some level or another) indefinitely, regardless of work performed or services rendered. While this may save the church money on annual premium payments now, it places all of the long-term risk on the church – a commitment that may or may not be feasible in the present or future.

The second option - and the one I would highly recommend - for caring for a disabled pastor is through the purchase of disability insurance coverage. Yes, the church will incur an expense related to the annual premiums, but this is generally minimal – especially when you compare it to the idea of keeping a pastor on your payroll indefinitely should they become disabled. This way, the church transfers the long-term risk to the insurance provider, and everyone can have peace-of-mind knowing that the pastor will be cared for should the unthinkable happen.

Does your church offer disability insurance coverage to your pastor?

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A Guiding Philosophy for Compensating Church Employees

I have a philosophy that guides my thinking in relation to church employee compensation and benefits. Before I share it, notice that I included all church employees, not just pastors. This applies to any and every employee a church may hire. Here is my guiding philosophy for church employees:

The church of Jesus Christ should attempt to treat its employees as well as, if not better than, the best secular employers of our day.

I can hear the cynic respond, “Of course you’d say that! You’ve got a dog in the fight.” Well, you are correct. I do have a dog in the fight, but this philosophy is not driven by my own current employment status, but rather by my belief that the church is to be a city on a hill - a light in a very dark world - in every single aspect of its life and dealings before this broken world. And this can be nowhere more vividly and practically displayed than in the realm of employee care.

I grew up in circles where pastors and Christian workers of all types were viewed as having, effectively, taken a vow of poverty as a condition of their employment. I can think of dozens of faithful, Christian school teachers, for example, who were paid poverty-level wages (or likely below) in exchange for their service.

Even for pastors, too many churches act as if it is okay to give little, if any, thought to truly being a blessing to those whose responsibility it is to shepherd their souls.

This just should not be!

While my philosophy may be an ideal that few, if any, churches or ministries ever fully attain, it should at least be the guiding force behind every decision that is made.

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