April 10, 2014
(Submitted by David Nicol, Chair of the Commission on Equitable Compensation)
(NOTE: After review it is the opinion of the NEC Committee on Rules that the NEAC Arrearage Policy proposed by The Commission on Equitable Compensation be deemed an Attachment, if passed, and be subject to the “sun-setting” provisions of NEC Rule VII D.5.)
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 or housing allowance installment, or to remit to the Conference Treasurer full payment for regular payroll deduction payments such as health insurance co-pay or personal pension plan, the church treasurer shall immediately notify both verbally (within 24 hours) and in writing (within 3 days): the Pastor, the Lay Leader, and the Chairs of S/PPRC, Finance, Trustees, and the Administrative/Church Council (where applicable); or the Pastor, the Lay Leader, and the Administrative leadership of an alternate Church structure as defined by ¶244.2 and ¶247.2; of the impending arrearage. Upon receipt of such notice, the Chair of S/PPRC and/or the Pastor shall immediately (within 3 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 annually document salary or benefit arrearages may result in a loss of compensation and/or forfeiture of pension and benefits.
2. Upon receipt of notice of a pending arrearage, the Chair of S/PPRC shall immediately (within 24 hours) call 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, including shortâ€term borrowing from designated 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 ¶624, such remedies cannot include a reduction in the Pastor’s compensation until the beginning of the next Conference year (July 1). However, remedies should be developed by the local church in an efficient manner, and this may include a vote of the church conference (at any time) to reduce pastoral compensation effective July 1.
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 Emergency Salary 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. reviewing the church’s budget, financial practices and accounts, and where appropriate making recommendations concerning if and where changes need to be made,
c. scheduling an outside audit of all church funds in compliance with General Council on Finance and Administration (GCFA) guidelines,
d. 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 invited to be an active participant in this process.
5. If the local church is already receiving a grant from the Commission on Equitable Compensation, the Commission may also:
a. determine if all grant funds allocated to the church were used to pay the pastor's salary,
b. examine the original grant application to determine if the amount requested to meet minimum compensation was reduced, and if deemed appropriate restore the grant to the originally requested amount or an amount that will meet the need assessed,
c. require an outside audit of all church funds in compliance with GCFA Guidelines (www.gcfa.org),
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 benefits (i.e. more than 90 days delinquent), then the Conference Treasurer shall notify the local church Treasurer, the Conference Benefits Officer, the District Superintendent, and the Commission on Equitable Compensation and the Conference Board of Pensions. On behalf of the Benefits Officer and/or District Superintendent shall approve a payment plan proposed by the local church so that the Conference receives full payment of pension and benefits by the end of the conference year. If the local church fails to develop a plan within a mutually agreed period, the Benefits Officer and/or District Superintendent may propose a payment plan for the local church.
7. Paragraph 2543.1 of The Book of Discipline makes clear that no real property on which a church building or parsonage is located shall be mortgaged to pay for the budgeted or current operating expenses of a local church, 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. It is the responsibility of the local church to provide a minimum compensation for its appointed clergy (¶624). To assure each appointed pastor receives full compensation, the certification of full payment will be required from each pastor each year. This certification is to be signed by the pastor, the Chairperson of S/PPRC, and the Treasurer after the final end-of-year check has been paid to the pastor reflecting a full year’s compensation has been paid, or after the final mid-year check has been paid to the pastor reflecting 50% of the full year’s compensation has been paid when a pastoral appointment change takes place at the Conference Year, or when pastoral compensation has been reduced at the Conference Year (July 1).
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, Wâ€2 forms, and/or a signed Certification of Payment Form.
10. Should there be a dispute between the pastor and the local church about the validity and/or the amount of a claimed arrearage, or if a required officer of the local church refuses to sign the Certification of Payment Form, the Cabinet or CEC shall call an ad hoc committee to determine the validity and amount of the arrearage claim.
a. The ad hoc committee shall consist of one representatives of CEC, two representatives of the Cabinet (at least one being the District Superintendent responsible for the local church), one representative of the Conference Treasurer, and one representative of the Conference Council on Finance and Administration. If the disputed arrearage includes pension or benefits payments, the ad hoc committee shall also include one representative of the Conference Benefits Office, and one representative of the Conference Board of Pensions
b. The ad hoc committee shall consult with both the pastor and the local church and shall have the authority to establish one of the following solutions:
i The ad hoc committee may negotiate a payment plan not extending beyond the Conference Year, or
ii The ad hoc committee may recommend an Emergency Salary Grant from the Commission on Equitable Compensation to make the arrearage whole by the end of the Conference Year, provided that the Emergency Salary Grant does not exceed 3 months of the pastor’s contracted salary, and further provided that the resolution shall include reduction of pastoral salary to avoid incurring further arrearages at the beginning of the subsequent Conference year, or
iii If the ad hoc committee determines the local church is incapable of making the arrearage whole by the end of the Conference Year, the ad hoc committee shall have the authority to commit the Annual Conference to payment of a valid claim of up to 6 months of the pastor’s contracted compensation, or up to 12 months of the pastor’s scheduled Minimum Compensation according to RS-101 for the relevant contract year(s), whichever is less, or
iv If the ad hoc committee determines the local church is incapable of making the arrearage whole by the end of the Conference Year, and the ad hoc committee determines the arrearage exceeds 6 months of the pastor’s contracted compensation, the ad hoc committee shall commit the Annual Conference to payment of a valid claim of up to 6 months of the pastor’s contracted compensation, or up to 12 months of the pastor’s scheduled Minimum Compensation according to RS-101 for the relevant contract year(s), whichever is less, and shall subsequently refer these claims to the next session of the Annual Conference to be resolved by the Annual Conference after appropriate deliberation.
v Regardless of the solution determined by the ad hoc committee, the local church is responsible for paying a valid arrearage claim (¶624). Any resolution requiring payment by the Annual Conference, except payment through an Emergency Salary Grant, establishes a claim by the Annual Conference against the local church, and the local church shall pay the Annual Conference the full amount paid by the Annual Conference to the pastor.
c. Decisions of the ad hoc committee may be appealed, by either the pastor or church, to a session of the next annual meeting of the Annual Conference, where the claim shall be deliberated and voted upon by the Annual Conference.
11. 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. Failure to report the arrearage on the Certification of Payment form, or within the statute of limitations may result in the pastor forfeiting any claim to the unpaid compensation. However, this statute of limitations shall not apply to arrearages incurred prior to September 1, 2013.
12. Once an appointment ends the Pastor no longer has claim on the local church for compensation funds (¶342.4). After an appointment ends, the pastor has a claim against the Annual Conference. A pastor’s arrearage claim against the Annual Conference establishes a claim by the Annual Conference against the local church, and the local church shall pay the Annual Conference the full amount paid by the Annual Conference to the pastor.
13. If a local church against which the Annual Conference has an outstanding arrearage claim moves toward Merger (¶2546, ¶2547), Discontinuation or Abandonment (¶2549), all arrearages shall be made whole before liquid assets may be disbursed.
a. If a planned Merger according to ¶2546 or ¶2547, includes the sale of property, and an arrearage cannot be settled prior to the sale of property, the plan of Merger shall include a use of funds from the sale of property, according to ¶2543.3 to settle any remaining arrearage and providing for congregational redevelopment free from continuing arrearage obligations.
b. If a local church moves toward Discontinuation or Abandonment (¶2549), and all arrearages cannot be made whole utilizing liquid assets, the Annual Conference shall have the same claim against the proceeds from local church assets as any other creditor.
14. An Administrative Complaint may be filed against a pastor who fails to report an arrearage according to the time lines established in this policy.