Should Pastors, Ministers, and Clergy Opt Out of Social Security?

Brent Pittman —  10/12/2012

Social Security and ScriptureDid you know that a minister can opt out of Social Security under a unique provision in the Social Security code? This sounds like a dream come true and an option many in the U.S. would like to have with the current uncertainty in the program.

Young ministers have an important tax decision within their first two years of ministry. Should they opt out of social security (for ministerial income only)? This decision will have a huge impact on their earnings potential and financial future.

This question of whether clergy/minister/pastor should opt out of Social Security is a controversial issue and has possible moral and legal implications.

History of Opting Out of Social Security for Clergy

How did this exemption for clergy to opt out of SS begin? It was a series of smaller steps until the modern exemption system was now in place:

  • 1951 Non-profit workers were given the option of entering the Social Security system. This caused a debate over whether ministers were self employed or employes of the church/denomination.
  • 1955 Those ministers whose denominations classisifed them as self-employed were given the option of joining the Social Security system, providing they (not their church) paid the full self employment tax.
  • 1968 Ministers were required to enter the Social Security system providing a provision they could opt of based on religious principals in their first 2 years of ministry. This sets up the modern dilemma for young clergy members.

The Ethics of Ministers Opting Out of Social Security

When a young minister looks at this issue, the advice is varied and the ethics involved are not black and white. This is a controversial issue with both sides giving valid reasons for staying in the Social Security system or opting out.

Dave Ramsey looks at it from a financial and stewardship perspective. His main argument is that the individual, not the government can be a better steward of the money–and should thus opt out if Biblical grounds exist. His perspective does avoid the moral wording of the text that must be signed and doesn’t advise on the biblical principal on which ministers should opt out–at least not in print.

Russell Moore, Dean of Theology at Southern Baptist Seminary, gives an alternative point. He asks ministers to consider their beliefs about the public issues of insurance and if they really have a Biblical and moral conviction for this stance as a conscientious objector.

“If the ‘opt out’ provision were revoked, would you willingly go to prison rather than pay the tax? And, would your prison time be because you saw the choice as between Christianity and idolatry?”- R. Moore

Others view exists and can be found (read the comments in above mentioned articles) within certain Christian denominations and traditions. It is important to consider exempting from Social Security based on history, theology, and the tax law.—NOT on personal or political beliefs.

The wording of the modern tax form that clergy must sign has been refined in recent years and should be examined closely.

Sign on the Dotted Line: Opting Out of Social Security

The instructions for opting out of self employment are based only on religious views and not personal or political views on government or the Social Security system.

“This application must be based on your religious or conscientious opposition to the acceptance of any public insurance that makes payments for death, disability, old age, or retirement; or that makes payments for the cost of, or provides services for, medical care, including any insurance benefits established by the Social Security Act.”- form 4361 (2011)

The below is the excerpt from form 4361 (2011) that must be signed by the clergy member:

I certify that I am conscientiously opposed to, or because of my religious principles I am opposed to, the acceptance (for services I perform as a minister, member of a religious order not under a vow of poverty, or Christian Science practitioner) of any public insurance that makes payments in the event of death, disability, old age, or retirement; or that makes payments toward the cost of, or provides services for, medical care. (Public insurance includes insurance systems established by the Social Security Act.) I certify that as a duly ordained, commissioned, or licensed minister of a church or a member of a religious order not under a vow of poverty, I have informed the ordaining, commissioning, or licensing body of my church or order that I am conscientiously opposed to, or because of religious principles I am opposed to, the acceptance (for services I perform as a minister or as a member of a religious order) of any public insurance that makes payments in the event of death, disability, old age, or retirement; or that makes payments toward the cost of, or provides services for, medical care, including the benefits of any insurance system established by the Social Security Act. I certify that I have never filed Form 2031 to revoke a previous exemption from social security coverage on earnings as a minister, member of a religious order not under a vow of poverty, or Christian Science practitioner. I request to be exempted from paying self-employment tax on my earnings from services as a minister, member of a religious order not under a vow of poverty, or Christian Science practitioner, under section 1402(e) of the Internal Revenue Code. I understand that the exemption, if granted, will apply only to these earnings. Under penalties of perjury, I declare that I have examined this application and to the best of my knowledge and belief, it is true and correct.

After reading this form, I suggest praying and consulting several ministers and a tax professional who works with clergy about their view of signing form 4361 before signing.

*Note that your exemption must be approved by the IRS before the April 15th deadline and you must inform your ordaining body that you object of receiving public insurance. The minister  also only has 2 years in which to sign the form and opt out.

If you do sign and opt out of Social Security, realize your need to prepare accordingly since you won’t have access to SS retirement, SS disability, FEMA, Pell Grants, etc from the government.

Have you struggled with this issue of opting out as a clergy member? What are your thoughts about ministers opting out of Social Security? 

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Brent Pittman

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Brent is a financial coach and writer looking for the perfect donut. He believes personal finance should be both fun and accessible to anyone willing to learn.
  • Guy

    Allow me to offer a perspective no one has mentioned. For a person entering the ministry later in life, social security benefits will still be intact. The system works on credits that are earned a maximum of 4 per year. If you compile 40 credits (10 full-time working years), you qualify for benefits and it can’t be taken away. Even if you never work again. The only benefit that will expire is disability in 10 years. The other benefits will be lower than paying in the rest of your career, but they will still be there. They calculate based on the highest 35 taxable earnings. I recommend someone in that situation look into it. Start with using the SS website to find your stats, and then call to prove me right! Most CPAs don’t know how the SS system works.

  • ekimyam

    Brent – I was ordained in my denomination in 2004 (in California) and did not know about this opt out option. I left the ministry for a while, but now am working as clergy again. I just filed my new ordination papers in my new state (Virginia) this year. Do I fall under the 2 year time frame since I was previously an ordained minister?

    • Sounds like a tricky question! Since I’m not a trained tax professional, I can’t answer this question. Best to consult a CPA on this one. You wouldn’t want to find out decades later you did it wrong.

  • Casey

    Brent, Have you considered the fact of someone who is fully vested, prior to joining the ministry? Looking at this from strictly a financial aspect, a fully vested clergy could still maintain some benefits later (62-65), while he/she continues to work in the ministry not currently paying the SS Tax. I believe it’s 10 years before someone if fully vested. Feel free to correct me if I’m wrong…

    • Interesting situation, I was speaking of mainly someone entering the clergy as a younger person, but I know that isn’t always the case. I would consult my tax advisor, especially in this case. They should be able to run some numbers for you.

  • Bernideen’s Tea Time Blog

    My husband got his first social security check last month. I have 2 more years before I get mine as I do not want to go early. We spent over 30 years in ministry. Most of our friends signed out and they are all wishing they had not. We never had the “cash flow our friends had” and it was difficult and at times I resented it. Now we look at it differently. I know one man in his 70’s who has started a ministry “just because” he needs income. If people are asking others for advice they better ask the older ones too!

    • Bernideen, I’ve heard the same story of those in ministry who didn’t invest for retirement either. If you opt out, then you HAVE to save for retirement. Glad to hear that you’ll be taken care of.

  • JJ

    Although I’m not yet a minister, it’d be easy for me to opt out because for me any participation in a ponzi scheme, such as SS, is immoral. Of coarse I do not think it is immoral for other to receive it while they have paid into it their entire lives, but if someone has the option to opt out, it is the moral thing to do. To receive one’s SS ultimately puts greater burden on those coming after you.

    • Hi. JJ thanks for responding. I’m not sure what you mean by “ponzi scheme” for SS. It also seems that a religious principal is necessary to opt out according to the documents. Do you have a religious reason to opt out or just a dislike for the SS system?

  • AverageJoe

    Talk about a niche topic!

    I had two ministers as clients over the years. This was a difficult struggle. My job, as advisor, was to lay out the facts and let them decide. One decided to opt out and the other paid in. The most interesting piece? The younger minister opted out while the older opted in. I think economics came into play….

    • Niche indeed. I believe the language on the form has changed in recent years to tighten up the loophole.

  • Kim

    I was never aware that there was an opt out provision. I don’t see that it would be sinful to receive social security that you paid into for your career. I guess it would depend on your beliefs, but I would hope if you opt out, you still make plans for retirement and health care as you get older.

    • Kim, being a minister has some funky tax laws that most CPA’s have to look up. They can only opt out for their income as a minister. Yes, if they choose to opt out, better have Emergency fund, life insurance, disability insurance, and retirement in place.

  • I don’t really see a dilmena here, if the government allows it, then you should absoluetly do it as long as you have some financial knowledge! There’s no way the government is going to do a better job than the average person haha

    • Harry, if you’re only look at the issue from a financial standpoint then it’s a no brainer to opt out. Though a moral perspective, the issue isn’t so black and white.