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1099 Employee's Eligibility

Barbara Hanis

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We had a call from a self-employed pastor who does not draw a regular salary for his services, and does ministerial services for multiple congregations. He received a 1099, but one church would like to contribute  $100 per month to a 403b(7) custodial account. Would that be acceptable or must it be a 403b(9)?????  

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The term "1099 Employee" is used often, but in reality there's no such thing as a 1099 Employee.  You're either an independent contractor or an employee.  If he's a bona-fide independent contractor, and they wish to pay him more, he can add it to what he bills them.  If he's not a bona-fide contractor, he should be on a W-2 with all of the benefits that employment brings (FICA matching, worker's comp, other statutory benefits, etc).

The FLSA sets forth the criteria to determine worker classification - you can read more here: https://www.dol.gov/whd/regs/compliance/whdfs13.htm


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As someone who also was a church treasurer/finance chair for far longer than I wanted to be, my understanding is that clergy are generally considered self employed for some purposes (such as SECA - self employed FICA and Medicare) but are considered employees for other purposes, including retirement plan participation. My wife was a UMC pastor for a number of years, she had to pay SECA but participated in the Conference retirement plans and could not do a solo/self-employed plan. 

But I think it also depends on the facts and circumstances. A "traveling" pastor who fills in at various churches across denominations for a speaking fee is probably self employed for all purposes.

There is a great/extensive IRS publication - which I don't have any more - google it (517) which has all the various tax rules regarding clergy and I highly recommend it if you deal with clergy - saved me many a battle with new clergy coming from churches that did things wrong, but I digress. 

Good luck.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services


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