Planning Financial Support

1. Planning Financial Support For Ministers and Church Employees Webinar for April 2, 2009 Host: Michael Solorio Presenter: Rod Wiltrout

3. Since its inception in 1845, the Southern Baptist Convention (SBC) has always had one mission—the Great Commission (Matt. 28:19-20). Statistics taken from the 2006 SBC Book of Reports.

4. Since its inception in 1845, the Southern Baptist Convention (SBC) has always had one mission—the Great Commission (Matt. 28:19-20). Since its launch in 1925, the Cooperative Program has grown to be one of the most effective, efficient, and expansive ways of reaching people and supporting missions. Statistics taken from the 2006 SBC Book of Reports.

5. Simply put, it begins with you.Out of gratitude and obedience to God for what He has done for you, you commit to give back to Him, through your church, a portion of what He provides.

6. The Bottom Line -People around the world hear the gospel and receive Christ.

7. Churches in California work together through the California Southern Baptist Convention in a wide array of ministries and missions.

8. Evangelism • Missions education and volunteer missions • Healthy church consultations • Leadership development pastors and lay leaders • Church planting • California Baptist University • California Baptist Foundation • Jenness Park Christian Camp

9. Through the Cooperative Program, you demonstrate the love of Christ and make a difference in the lives of people 24/7/365. For more information, log on to www.csbc.com and visit the Web sites of all SBC entities through provided links.

10. Coordinate the efforts of more than 5,271 missionaries who are committed to sharing Christ throughout the U.S., Canada, and the U.S. territories.

11. Plant in excess of 1,455 new churchesin fast-growing cities and suburbs to small towns and rural communities.

12. Endorse over 2,778 chaplainsand produce evangelistic tracts, materials, and methods to help you share your faith.

13. To help the Cooperative Program reach its potential, Please: PRAY Pray regularly for your Southern Baptist missionaries in California, the United States and around the world.

14. To help the Cooperative Program reach its potential, Please: GO and SHARE Be involved in some sort of missions endeavor in your community, state, nation and world, sharing Jesus wherever you go.

15. To help the Cooperative Program reach its potential, Please: GIVE Give regularly through your church. Encourage your church to increase its participation through the Cooperative Program.

17. Planning Financial Support For Ministers and Church Employees Webinar for April 2, 2009 Host: Michael Solorio Presenter: Rod Wiltrout

18. The Old Way — “The Package” Package approach dangers: • A lump sum is misleading • Staff may pay unnecessary taxes • Staff person may choose cash over insurance and retirement protection • Church may incur a financial burden “We’ll pay you a lump sum of $$ and you can divide it any way you want.”

19. The Better Way…Planning Financial Support (Page 4) Why is planning financial support important? • That God’s Word may be honored • To reduce confusion and instability • To reduce employee tax liability

20. The Better Way…Planning Financial Support (Page 4) Why is planning financial support important? • To ensure church funds arespent appropriately • To clarify true personal income • To extend the tenure of church employees

21. Special Tax Rules for Ministers (Page 5) • Who is a minister for tax purposes? • How are ministers different fortax purposes? • Is a minister employed or self-employed?

22. Who Is a Ministerfor Tax Purposes? • The IRS answer has nothing to dowith theology • Three important tax court cases: • Wingo — 1987 • Knight — 1989 • Reeder — 1993

23. Determining a“Minister for Tax Purposes” • Is the person ordained, licensedor commissioned? • Does the person administer ordinances? • Does the person conductreligious worship? • Does the person have management responsibilities in the church? • Is the person considered to be a religious leader by the church?

24. How Ministers AreDifferent for Tax Purposes • Eligibility for housing allowance • Self-employment status for Social Security • Exemption of wages from federal income tax withholding • Use of quarterly estimated tax payments or voluntary withholding • Possible exemption fromself-employment tax

25. Employee or Self-employed? • Weber v. Commissioner — 1994 • Seven factors identified by court • Ignored 20 factors used since 1987 • No one factor determines status • Facts and circumstances of each case

26. Employee or Self-employed? U.S. Tax Court (1994) seven-factor test: • The degree of control the employerhas over the details of the work • Which party invests in the facilitiesused for the work • The opportunity the worker has forprofit or loss

27. Employee or Self-employed? U.S. Tax Court (1994) seven-factor test: • Whether the employer has the right to discharge the worker • Whether the work is part of the employer’s regular business • The permanency of the relationship • The relationship the parties think theyare creating

28. Employee or Self-employed? Most ministers have a “dual tax status.” They are always self-employed for Social Security purposes (for ministerial income), but they are usually employees for income tax purposes.

29. Six Steps toFinancial Support Planning (Page 3) • Step #1: Determine the needs • Step #2: Establish written financialsupport policies • Step #3: Provide for ministry-related expenses

30. Six Steps toFinancial Support Planning (Page 3) • Step #4: Provide employee benefits • Step #5: Determine personal income • Step #6: Complete a financialsupport worksheet

31. Step #1: Determine the Needs (Pages 6–7) Identify the categories of financial support • Ministry-related expenses • Protection benefits • Personal income

32. Step #2: Establish Written Financial Support Policies (Pages 8–9) Policies should cover at least four areas: • Ministry-related expenses • Employee benefits • Personal income • Other personnel policies

33. Step #3: Provide for Ministry-Related Expenses (Pages 10–12) • Budget adequately for expenses • Avoid payment of unnecessary taxes • Establish an AccountableReimbursement Plan

34. Church Ministry-Related Expenses (Page 10) • Vehicle expenses • Work-related meetings,workshops, conferences • Ministry expenses • Continuing education • Hospitality expenses

35. Key Points to an Accountable Reimbursement Plan (Pages 11–12) • The expense must have abusiness purpose • Adequate substantiation of business expenses is required • Written record stating amount, date, location and business purpose • Receipts required for expenses over $75

36. Key Points to an Accountable Reimbursement Plan (Pages 11–12) • Expenses must be substantiated within 60 days • Excess advances must be returned within 120 days • Unused money cannot be given to an employee as income or bonus • Sample monthly expense report (page 10)

37. Key Points to an Accountable Reimbursement Plan (Pages 11–12) • Church reimburses business expenses from budgeted church funds • Caution: cannot be funded from salary • Sample reimbursement policy (page 12) • Employee issues when writing off business expenses

38. Employee Issues When Writing Off Business Expenses • Can only write off what is above 2% of adjusted gross income • Must have enough expenses to itemize and be above the standard deduction of $10,300 • Minister must follow the “Deason Rule” and must reduce expenses by % of income that includes housing allowance

39. Deason Rule Salary + housing total $40,000 Non-taxable housing $10,000 % of nondeductible $10,000/$40,000 = 25% Assume eligible business expenses = $4,000 Eligible expenses of $4,000reduced by 25% = $3,000(then reduced by 2% of adjusted income)

40. Step #4:Provide Employee Benefits (Pages 13–14) • Medical, life and disability coverage • Retirement plan contributions • Social Security assistance

41. Providing a Benefits Plan for Ministers and Church Employees • Demonstrates obedience tobiblical teaching • Saves taxes • Provides protection for the church • Extends employee service

42. Life, Medical and Disability Coverage: Personal and Group • Term life insurance • Medical coverage • Eight PPO plan options • Includes prescription drug coverage • HSA-qualified plan available • Long and short-term disability coverage • Dental plans • Personal accident coverage • Long-term care education and insurance

43. The Church Retirement Plan • A 403(b) tax-sheltered retirement plan • For all Southern Baptist church employees who receive taxable income

44. The Church Retirement Plan — Special Features (Page 14) • Contribution options • Tax advantages • Family protection • Matching contributions • Investment opportunities

45. The Church Retirement Plan —Tax Advantages • Employer contributions not subject tocurrent income taxes • Participant contributions not subject to current income taxes • Investment fund earnings not subject to current taxes

46. The Church Retirement Plan —Tax Advantages • Retired ministers allowed to designate benefits as a tax-free housing allowance • Contributions by ordained ministers not subject to current Social Security taxes • Higher contribution limits than an IRA

47. The Church Retirement Plan Benefits of state convention contributions: • Protection benefits • Disability benefits up to$500 per month • Survivor benefit up to $100,000 • Retirement benefits • Contributions up to $17.50 per month

48. The Church Retirement Plan State Convention Contributions $105.00 Matching RetirementContributions $1 for every $3 contributed Maximum $17.50 Your Monthly Contribution Level $52.50 Protection Benefits Disability Income Benefit Survivor Benefit $1.00

49. Investment Risk and Return

50. You should carefully consider the investment objectives, risks, charges and expenses of GuideStone Funds before investing. For a copy of the prospectus with this and other information about the funds please call1-888-98-GUIDE (1-888-984-8433) or visit www.GuideStoneFunds.org to view or download a prospectus. You should read the prospectus carefully before investing.