Fed Raises Minimum Salary Requirements For Exempt Status
From Frank Sommerville, Church Law & Tax. Read this article on Church Law & Tax.
The Department of Labor (DOL) is raising the minimum salary requirement under the Fair Labor Standards Act (FLSA) from $684 per week to $844 per week as of July 1, 2024.
Brief history of FLSA
FLSA became law in 1938 and was the first federal regulation of employment practices to withstand a Supreme Court challenge. It eliminated most child labor practices and established a minimum wage ($.25 per hour) and minimum weekly salary of $100 in order to be exempt from overtime pay. FLSA required overtime pay for nonexempt workers that put in more than 44 hours in a week. That standard dropped to 40 hours a couple of years later. Meanwhile, the minimum salary requirement for exempt status has changed many times through the years. It last changed in 2020 from $455 to $684 weekly.
New minimums phase-in
The new regulations establish the minimum salary at the 35th percentile of full-time salaried workers in the lowest wage Census region, which is $1,128. Because the new minimum represents a significant increase over the previous minimum of $684, the DOL opted for a phased-in approach.
- Phase 1: $844 per week (equivalent to $43,888 per year) on July 1, 2024.
- Phase 2: $1,128 per week (equivalent to $58,656 per year) on January 1, 2025.
After that, the minimum salary will change every three years on July 1, starting in 2027.
Note: The minimum salary for exempt status applies for part-time employees. In simpler terms, the minimum salary for exempt status applies whether an employee works one hour or 40 hours.
Increases for highly-compensated individuals
The salary thresholds for highly-compensated classification also increased from $107,432 to $132,964 for 2024 and $151,164 for 2025.
What this means for churches and church leaders
All churches should immediately evaluate all positions and determine which positions are subject to the ministerial exception. That is because ministerial exception positions (clergy, pastors, ministers, and others with spiritual duties) are exempt from all labor laws, including federal and state minimum wage and overtime laws.
From there, a church must determine what positions may change from exempt to nonexempt under the new minimum salary test. The church must act quickly regarding positions with compensation of less than $844 per week, or $43,888 annually. The church must either re-classify these workers as nonexempt or increase their compensation to $844 per week or $43,888 annually.
Many churches err by classifying workers as exempt when they fail the duties test. Churches should also use this opportunity to review all their exempt positions to confirm that they otherwise qualify for their exempt classification.
Remember, the ministerial exception classification is entirely independent of the worker’s classification for income tax purposes. For example, a children’s ministry director may not qualify as a minister for income taxes because he/she does not possess a ministerial credential. However, the children’s ministry director qualifies for the ministerial exception for employment laws.
Schools (K-12) should note that school teachers and school administrators are not subject to the minimum salary test. The church should discuss with an employment law professional to determine whether a preschool or daycare center qualifies as a school for employment laws.
The other standards for exempt status remain unchanged. These standards include that the employee must be compensated by salary that may not vary based on the number of hours worked. The worker must perform specific duties as defined by the Department of Labor. These duties tests include Executive, Administrative, and Professional duties. The defined duties must represent the workers’ primary duties. The Department of Labor will make the determination based on the totality of the circumstances.
Important Caveat
Many business groups have filed a suit to block previous increases in the minimum salary. New lawsuits are expected to challenge this latest increase. Some uncertainty will exist until the increase is implemented. Church administrators need to monitor the status of this proposed increase, but should still plan to implement the changes to comply with this new announcement.
If you’re a Church Law & Tax member but haven’t yet spent time in Frank Sommerville’s 6-part series on church employment best practices, now is a good time to go through it. Elaine Sommerville’s “Church Compensation: From Strategic Plan to Compliance” covers FLSA classification in great detail. Advantage Members enjoy 20% off this important reference work for church leaders.
Church Financial Literacy and Leadership Program
The Presbyterian Foundation recognizes the significance of providing resources to pastoral leaders and the congregations they serve, focusing on enhancing church financial literacy, leadership, and management to foster vitality and excellence in ministry. The following programs are possible through a grant received from the Lilly Endowment Inc.’s initiative to tackle economic challenges faced by pastoral leaders. Read about each component of the Church Financial Literacy and Leadership Program and contact the Presbyterian Foundation for more information.
Church Financial Leadership Academy
There is new video content available in the Church Financial Leadership Academy, which is a website with free videos offering training on demand. Watch new topics like “Generosity for Families” with Rev. Ellie Johns-Kelley, who discusses teaching generosity within your home and to the youngest members of your congregation. Other new videos include: Planned Giving, Endowments Part 1, and Endowments Part 2.
If you aren’t already registered, sign up today using the registration code PCUSA. Since 2019, the CFLA has provided pastors with financial education in a convenient online setting. New videos will be added each month until the Fall, so check back often for new content. Visit the Academy at: https://churchfla.com/.
Church Financial Literacy Grant Program
Are you considering your current stewardship education needs? Submit a grant application for the Church Financial Literacy Grant Program. These are matching grants; we cover up to half of the total cost of attending church financial leadership education programs including Stewardship Kaleidoscope. Visit our website for more information including pre-approved events/courses.
Church Financial Leadership Coaching Program
We are accepting application for our coaching program. This program offers a one-year relationship with a trained coach to help you walk through church finance with the goal of making pastors more confident in how to help their church through finance.
Stewardship Navigator
The Stewardship Navigator is a free program offered to help pastors, staff and church volunteers build a stewardship program. It offers a stewardship calendar, campaign options, narrative budget builder and legacy giving program. This program puts resources at your fingertips.
Decision-making resources for the Board of Pensions 2025 Benefits Plan
Helpful resources are available to assist congregations and their pastoral leadership with 2025 benefits decision-making. Visit seasonofrebuilding.pensions.org for these resources as well as information about the 2025 Benefits Plan:
- 2025 Decision Guide for Minister Benefits to help determine 2025 eligibility and costs for the Congregational Pastors Package, Transitional Pastor’s Participation, and the Covenant Package
- dues scenarios providing examples with calculations of how the 2025 dues packages apply to ministers with varying situations
- updated FAQs section
These upcoming education programs from the Board of Pensions also can help guide congregations and staff through benefits conversations and decision-making:
- Faithful Conversations, an e-learning course coming in July, designed to equip pastors and congregations to have faithful conversations and make decisions about benefits and other aspects of compensation
- Serving More, Serving Better (2025), a benefits literacy e-learning course coming this month that introduces plans, programs, and dues packages for 2025
- Tips for Determining the Right Healthcare Coverage for You and Your Family webinar Aug. 8 (registration opens in July), where you’ll learn about ACA established health insurance exchanges, Medicare, Medicaid, CHIP, and alternative sources of coverage
Board of Pensions 2025 plan update
“The 2025 Benefits Plan of the Presbyterian Church (U.S.A.), including dues, is now available. With the new flexibility and choice being offered, we hope to see more ministers being enrolled for benefits — and gaining access to assistance and education programs that nurture ministries, helping to keep congregations vital.
“The new Benefits Plan, effective Jan. 1, 2025, includes two dues packages: the Covenant Package and the Congregational Pastors Package. The Covenant Package provides the Defined Benefit Pension Plan, death and disability coverage, temporary disability coverage, and the Employee Assistance Plan. It is for any employee working at least 20 hours weekly, regardless of ordination status. With dues at 10% of effective salary, this income protection package is unequaled on the commercial market. We hope it becomes our denomination’s minimum commitment to every minister we ordain.
“The Congregational Pastors Package is required for installed pastors and may be provided to any minister of the Word and Sacrament or commissioned pastor serving a congregation at least 20 hours per week. The package includes Member-only PPO medical coverage and all the income protection benefits included in the Covenant Package. Dues are 26% of effective salary, subject to minimum and maximum dues for medical coverage.
“Medical coverage for family members is an option in the Congregational Pastors Package, providing congregations with flexibility and choice. Today, fewer than half of the ministers enrolled in Pastor’s Participation elect to use full family coverage, but congregations still must pay for it. Under the Congregational Pastors Package, congregations choose whether to contribute to family coverage costs, which are established as national, community-rated, fixed pricing. For 2025, annual costs are $8,950 for children, regardless of the number of children enrolled; $11,000 for spouses; and $20,600 for full family coverage. More details are available here.
“The 2025 plan offers Transitional Pastor’s Participation for any minister who is enrolled in Pastor’s Participation as of Dec. 31, 2024. This option will sunset Dec. 31, 2027, and is not transferable if a minister changes positions. For 2025, dues total 43% of effective salary.
“The Church is changing, and the 2025 Benefits Plan has been designed to change with it. To support faithful decision-making, our Church Consultants are providing guidance as congregations and presbyteries talk with their pastoral leaders about benefits needs. Please call us at 800-PRESPLAN (800-773-7752) (TTY: 711) as you work through your choices and visit here for additional information.”
QuickBooks Online available through TechSoup
As QuickBooks Desktop is being decommissioned, you may be moving to QuickBooks Online. TechSoup offers QuickBooks Online for $80 a year. If you need help registering for a TechSoup account, please feel free to reach out to me.
How long should I keep income tax records?
Tax season is over, which always raises the question, “How long should we keep our past tax filing records?” Here is some guidance from Richard Hammar, the Church Tax & Law expert, and the link to the full article.
“In general, you should keep records that support an item of income or a deduction appearing on a return until the statute of limitations (the period during which the IRS can audit your return) runs out. Usually this is three years after the date a return was filed (or three years after the due date of the return, if later). However, in some cases it is wise to keep records for a longer period of time, since a six-year limitations period applies in some situations, and in others (e.g., no return was filed or a return was fraudulent) there is no time limitation on the authority of the IRS to begin an audit.”
Church treasurers and finance committees
As the Treasurer of our Presbytery, I am reaching out to offer my support and assistance to you in your vital role within your congregations. Navigating the financial responsibilities of a church can often feel like a daunting task. However, you don’t have to face these challenges alone. I am here to help ease your burden and provide guidance wherever needed.
I understand the unique complexities involved in managing church finances, and I am committed to offering support to your church. Whether you require assistance with budgeting, financial reporting, or any other aspect of financial management, I am at your service. Furthermore, I am more than willing to make visits to your church if that would be beneficial to you. Sometimes, a face-to-face conversation can be the most effective way to address concerns and find solutions. Please feel free to reach out to me at treasurer@wvpresbytery.org or 304-744-7634 any questions or to schedule a visit. Together, let’s ensure that our congregations are equipped with the financial tools and support they need to thrive.
2024 Special Offerings Calendar
Here is this year’s calendar for the four churchwide Special Offerings of the Presbyterian Church (U.S.A.), of which two remain:
PEACE & GLOBAL WITNESS: Sept. 8 to Oct. 6
CHRISTMAS JOY: Dec. 3 to Dec. 24
NOTE: Donations to the four Special Offerings are accepted at any time. The dates above are for times of special emphasis on the offerings. Click here for more information or to order resources, or call the PC(USA) Store at 800-533-4371.