By Christopher Wells, Executive Director
Religious employee benefits leaders have a good idea of what retirement futures would look like in the absence of Social Security — and they’re urging immediate congressional action to address the program’s impending financial crisis. Lawmakers should listen.
On September 8, the Church Alliance issued a statement urging Congress to address Social Security’s projected funding shortfall before the program’s trust fund reserves for old-age and survivor benefits are depleted in 2032. The statement reflects the views of religious employee benefits leaders across Baptist, Episcopal, Conservative Jewish, Reform Jewish, Lutheran, Presbyterian, and other faith traditions. Collectively, the participating organizations provide employee benefits for approximately one million people across the country.
For most clergy, as for most Americans, Social Security is one leg of the traditional three-legged retirement stool, alongside employer-sponsored retirement plans and personal savings. Without congressional action to address the impending funding shortfall, the Social Security Administration will be legally required to reduce Social Security benefit payments by about one-fifth. The shortfall-triggered benefit reductions would erode an important source of income for retired clergy and other religious sector employees, as well as a broad range of other retirees.
Denominational benefits leaders have insights on the potential impact of a shortfall. Since 1968, clergy have been allowed to opt out of paying Social Security taxes and receiving Social Security benefits. Unfortunately, some members of the clergy, often after receiving bad advice or incomplete information, have opted out, but later regretted this decision. The decision to opt out of Social Security cannot be reversed. It affects eligibility for a wide range of benefits, including retirement income, disability protection, and survivor benefits. In many cases, clergy who have opted out have not saved enough to cover the related gaps in their financial security. After a lifetime of faithful service, these clergy can be left in need during their retirement years. The Congressional Budget Office estimates that about 4,000 clergy would reverse opt-out decisions, if given the opportunity.
A decision to opt out of Social Security has a deeper impact on an individual’s financial livelihood than the projected shortfall-triggered reduction in the retirement benefit payment amount would. But the effects of the impending shortfall in reserve funding would be far wider, potentially affecting tens of millions of Americans. Religious employee benefits leaders recognize that these across-the-board cuts could have an immediate and significant negative impact on the financial livelihood of hundreds of thousands of clergy and religious sector employees who have participated in Social Security, not to mention future beneficiaries. According to the U.S. Bureau of Labor Statistics, ministers make a median annual income of $58,920. For someone in this income bracket, Social Security actuaries have estimated that the program’s benefits would be expected to replace between 41 percent and 55 percent of the person’s annual income.
Congress recognizes the importance of Social Security benefits for clergy. To help clergy who have changed their minds on decisions to opt-out, Congress passed bills to open temporary opt-in windows for clergy in 1977, 1986, and 1999. Lawmakers are considering similar legislation this year. But to adequately protect the retirement security of the nation’s clergy and other retirees, Congress must also address the impending funding shortfall before mandatory benefits cuts go into effect.
Denominational benefits leaders know from experience how painful the alternative would be.
