What is Salary Basis?
Employer Contributions
Employee Contributions

 

What is Salary Basis?

Salary basis means cash salary plus housing allowance, if any. For clergy who receive housing in a parsonage rent-free, the estimated value of the parsonage is recommended to be 30% of cash salary. This housing value is added to cash salary to give the total salary basis.

After you become a member of the Annuity Fund, your employer is billed quarterly for an amount equal to a percentage of your salary basis. You have the option to set aside a portion of your pay voluntarily as extra contributions.

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Employer Contributions

The Pension Board and the General Synod of the United Church of Christ recommend that UCC churches and related employers pay pension contributions of 14% of salary basis for each participating minister and lay employee.

If your employer contributes at least 11% of your salary basis to the Annuity Fund, you are also eligible to join the Life Insurance and Disability Income Benefit Plan and the Group Life Insurance Plan. Pension contributions of at least 6% are required for you to be considered an active member, meaning that the Pension Board will bill your employer each quarter for pension contributions due on your behalf.

If you had previously been eligible to participate in the insurance plans, your enrollment will be contingent upon evidence of good health.

When you retire, you have the ability to withdraw in cash up to 20% of the total accumulation in your pension accounts. The remainder is converted to an annuity to provide you with a source of income during your retirement years.

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Employee Contributions

There are two types of employee contributions: before-tax and after-tax.

Before-Tax Contributions
You may elect to make additional tax-sheltered contributions to the Annuity Fund by setting aside a portion of your salary to be paid into the Fund in your name. You pay no income tax on these contributions or their investment earnings until you begin receiving annuity payments or take a cash lump sum distribution in retirement.

The Internal Revenue Service (IRS) limits the amount you can contribute to the Annuity Fund in combination with the pension contributions made by your employer. At your request, the Pension Board will prepare a calculation of the maximum contribution limit that applies specifically to you.

Remember, if you are a member of the clergy, a portion of your annuity benefit in retirement may be treated as a tax-exempt housing allowance.

You may take any or all of your extra contributions to the Annuity Fund as a lump sum cash withdrawal at the time you begin receiving annuity benefits (provided those contributions were made after 1987 and are above the recommended base contribution of 14% of salary basis). That means you can save for the future using the Annuity Fund and gain the advantage of tax deferral, while retaining the ability to use those funds to improve your retirement income from the Annuity Fund or however you wish when you’re ready to retire at age 55 or older.

After-Tax Contributions
If you make extra contributions over the IRS limit, they will be considered taxable income. Annuity amounts attributable to after-tax contributions will not be taxable when paid out to you. Investment earnings on after-tax contributions will not be taxable until paid out.

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