Adopting an arrearage policy at AC 2013

By the Rev. Jeremy L. Howell

As a result of new language in the 2012 Book of Discipline, this year I have the responsibility as the Chairperson of the Commission on Equitable Compensation to present to the Annual Conference an Arrearage Policy:

"625. Equitable Compensation “ 2. It is the purpose of the commission on equitable compensation to support full-time clergy serving as pastors in the charges of the annual conference by . . . (d) submitting an arrearage policy to be adopted by the annual conference."

This immediately provokes several questions: Just what is an arrearage? Why do we need a policy? What will the policy say? Where did our proposed policy come from?

In the simplest terms, an arrearage occurs when a church or charge is unable to pay in full the approved compensation or support to or for its pastor. This would include those items adopted by the charge conference, such as base compensation, housing allowance, accountable reimbursements and direct billing payments. (From the 2012 Discipline, Para. 624: Payment obligation “ 1. Each church or charge has an obligation to pay the full compensation, as approved by the charge conference, to its pastor(s). )

Why do we need such a policy? In an ideal world, we wouldn t; every church or charge would always be able to find the means to pay its pastor. However, this is not always the case. While rare, there are those occasions when sudden financial misfortunes leave a church unable to meet its anticipated obligations.

Several years ago in our annual conference, the financial depression caused several business owners in one church to lose their businesses, and the result was that the church was unable to pay its pastor in full.

At the quadrennial training for conference administrators sponsored by The United Methodist Church s General Council on Finance and Administration, held Feb. 1-3 in Jacksonville, Fla., a district superintendent from a Midwestern annual conference who was attending the Equitable Compensation workshop was asked, How many churches in your district are two funerals away from being unable to pay their pastor? After a moment s thought he replied, Three or four out of 85.

While the numbers may not be as high in our own annual conference, it does give one pause.

Should it become necessary to implement, our arrearage policy would give specific instructions and time lines in carrying out the mandate of Para. 624.1: If it becomes apparent that a church or charge will be unable to so provide the compensation approved by the charge conference, the church or charge Staff Parish Relations Committee chairperson, finance chair or treasurer shall immediately notify, both in writing and verbally, the pastor, district superintendent and congregation.

The intent of the arrearage policy is multi-fold:

1) To ensure pastors are paid on time.

2) To ensure direct billing is paid on time.

3) To prompt the local church to act immediately should it become apparent that either 1) or 2) is not going to occur.

4) To provide an initial plan of action to deal with the situation, taking note of what can and cannot be done per the Discipline.

5) To find ways to help the local church meet its financial obligations and to limit the liability of the annual conference.

As a way of expounding on 5), let me offer a brief explanation of how the language about arrearages was introduced to last year s General Conference. The proposal came from the executive committee of the National Association of Commissions on Equitable Compensation. A member of that committee is from the Cal-Pac Annual Conference. Cal-Pac, because of a lack of an arrearage policy and through some bad decisions, is currently embroiled in a lawsuit involving several hundreds of thousands of dollars over an arrearage going back more than 20 years.

The policy we will be voting on this year began largely with a sample arrearage policy developed by the executive committee of the NACEC. It was edited for use in our annual conference and offered to various conference officials for review and comment, including Bishop Jonathan Holston, Conference Benefits Officer the Rev. David Anderson, Conference Treasurer Tony Prestipino and others. The Commission on Equitable Compensation has approved it. The Cabinet and conference CF&A have reviewed it and offered their comments and support.

To avoid lengthy and protracted debate on the conference floor, the policy is printed below for review.

I invite your questions, comments and friendly amendments. I may be reached at [email protected] or 843-303-8836.

Arrearage Policy for the S.C. Annual Conferen

1. In the event that the local church treasurer becomes aware that the church will be unable to provide to the pastor full payment of a regularly scheduled payroll, accountable reimbursements or housing allowance installment, the church treasurer shall immediately notify both verbally (within 24 hours) and in writing (within 3 days) the pastor, the lay leader, the lay member of annual conference and the chairs of S/PPRC, finance, trustees and the administrative/church council of the impending arrearage. Upon receipt of such notice, the chair of S/PPRC and/or the pastor shall immediately (within three days) notify the district superintendent of the impending arrearage. It is the pastor's responsibility to keep copies of all such written notifications, and to provide additional written confirmation to the district superintendent when an arrearage has taken place. Failure to document salary or benefit arrearages may result in a loss of compensation and/or forfeiture of pension and benefits. If the church is unable to remit to the conference treasurer full payment for regular direct billed benefit payments such as pension and health benefits, the procedures in item 6 below shall be followed.

2. Upon receipt of notice of a pending arrearage, the chair of S/PPRC shall immediately (within 72 hours) schedule and hold a meeting of the pastor, lay leader and chairs of finance, trustees and the administrative/church council to discuss the financial situation and seek remedies to prevent an arrearage from occurring. Such remedies might include:

  • a. Drawing from invested funds,
  • b. An emergency appeal for special giving from the congregation,
  • c. Emergency grants or loans from the District or Conference.

According to the Book of Discipline Para. 624, such remedies cannot include a reduction in the pastor s compensation until the beginning of the next conference year.

3. If, after consultation among the lay leader and chairs of S/PPRC, finance, trustees and the administrative/church council, it becomes apparent that the church may be facing a long-term financial crisis, the chair of S/PPRC shall notify in writing the pastor and district superintendent that:

  • a. An Equitable Compensation Subsidy Grant may be necessary to maintain compensation for the remainder of the conference year or,
  • b. A change in pastoral compensation or appointment may be necessary at the beginning of the following conference year.

4. If the local church becomes delinquent in the pastor s compensation (i.e. more than 30 days delinquent), then the district superintendent shall notify the Commission on Equitable Compensation, which on its own initiative may do any or all of the following, but not limited to:

  • a. Sending a representative from CEC to meet with the local church and pastor to seek resolution of the issue;
  • b. Developing with the local church a payment plan so that the pastor receives full payment of compensation by the end of the conference year.

The district superintendent shall be a participant in this process.

5. If the local church is already receiving a subsidy grant from the CEC, the CEC may also:

  • a. Determine if all subsidy grant funds allocated to the church were used to pay the pastor's salary.
  • b. Examine the original subsidy grant application to determine if the amount requested to meet minimum compensation was reduced
  • c. Require an outside audit of all church funds in compliance with GCFA guidelines (
  • d. Notify the district superintendent of its findings and recommendations in writing.

6. If a local church becomes delinquent in the payment of the pastor s direct-billed pension and health benefits (i.e. more than 90 days delinquent), then the conference treasurer shall notify the conference benefits officer, the district superintendent and the CEC. On behalf of the conference, the benefits officer and/or district superintendent shall develop a written payment plan with the local church so that the conference receives full payment of pension and health benefits by the end of the conference year.

7. Paragraph 2542.1 of the Discipline makes clear that no real property on which a church building or parsonage is located shall be mortgaged to pay for the current or budgeted expenses of a local church (including arrearages), nor shall the principal proceeds of a sale of any such property be so used. This provision shall apply alike to unincorporated and incorporated local churches.

8. In extreme and unresolved circumstances, the local church and/or pastor may petition a session of the annual conference, following proper procedures, for assistance in payment of the arrearage not to exceed the minimum conference compensation standards. However, it is the responsibility of the local church to provide a minimum compensation for its appointed clergy (Para. 624).

9. It is the responsibility of the pastor to provide evidence of an arrearage by providing documentation, such as treasurer's reports, charge conference reports of adopted salary and compensation, check stubs, W-2 forms, etc.

10. The statute of limitations for filing a claim for funds from the annual conference (i.e. notification to the district superintendent of the arrearage) for any salary arrearage is one year from the date of the initial arrearage. Once an appointment ends, the pastor no longer has claim on the local church for compensation funds (Para. 342.4).

11. The district superintendent shall provide a report of the matter and actions taken to be placed in the permanent files of the church and the pastor.

“ Approved by the Commission on Equitable Compensation, Jan. 12
Supported by The Cabinet, Feb. 13
Supported by CF&A, Feb. 26

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