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Social Security changes for 2000 of potential benefit to ministers

DALLAS (BP)–Two important developments concerning Social Security will affect how ministers and U.S. workers plan for retirement — and both changes are good news, a spokesperson for the Annuity Board of the Southern Baptist Convention said.

First, Congress enacted legislation in 1999 that would permit ministers who chose to exempt themselves from Social Security to opt back into the program as of Jan. 1, 2000, through April 15, 2002.

“Many ministers who revoked their exemption from the Social Security program would like to rejoin the program because of the disability and survivor benefits and Medicare coverage provided through Social Security,” said Jim Morrison, Annuity Board managing director for retirement services.

“In the past, they were unable to rejoin the program since a decision to opt out of Social Security was irrevocable. We encourage all ministers who opted out to seriously consider this window of opportunity to participate in the Social Security program. The opportunity may not be available again,” Morrison said.

The new law states that ministers can revoke an exemption from Social Security as of Jan. 1, 2000, and they may do so up to the April 15, 2002, deadline. “However, when revoking an exemption, a minister must choose to begin paying self-employment (SECA) taxes as of Jan. 1, 2000 or Jan. 1, 2001,” said ministerial tax expert Richard Hammar.

Hammar recommends that ministers who decide to revoke their exemption should minimize the financial impact of the decision by “opting in” during the first quarter of either 2000 or 2001. Revoking the exemption means ministers must pay all SECA taxes back to the beginning of the year. “Paying back SECA taxes can result in a substantial tax liability,” Hammar cautioned.

“Many ministers who opted out of Social Security may have failed to understand some of the benefits available through the program, such as disability and survivor benefits, as well as Medicare coverage. Medicare medical insurance is optional under the program, but the cost is generally far less than coverage available from other providers,” Hammar writes in the “Ministers Tax Guide for 1999 Returns” published by the Annuity Board. The new annual tax guide is available on the Annuity Board’s Internet site, www.absbc.org.

The second Social Security development comes in the form of a direct mail effort. Beginning last October, the Social Security Administration began automatically mailing out annual benefit updates to about 125 million U.S. workers age 25 and older. The statement shows how much an individual’s income was taxed each year for Social Security and Medicare, and it gives a picture of the retirement, disability and survivor benefits an individual is building up.

“These statements are a valuable piece of information that the Annuity Board can use to assist our participants in planning for retirement,” Morrison said.

The benefit statements also include another critical piece of information: how old an individual needs to be to collect full retirement benefits from Social Security.

Most workers assume that full Social Security benefits are available at 65; however, this age is gradually moving up. For example, a worker who is 61 or younger today will have to wait at least an extra two months and as many as two years after reaching age 65 before qualifying for full Social Security benefits.

Morrison added, “This is important because more than 95 percent of the workforce will be affected by the change in age for full benefits. While you can sign up to receive benefits early, you may need to reconsider. Retiring before you qualify for the full amount means an individual’s benefits could be reduced by up to 30 percent.”

These new Social Security statements add to the services the Annuity Board can provide. “With this annual piece of mail, the Social Security Administration has made our emphasis on preparing for retirement an easier task,” Morrison said.

The Annuity Board of the Southern Baptist Convention was established in 1918 and serves over 100,000 participants in Southern Baptist organizations worldwide.

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