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Withdrawals from your accountmay be subject to 20% federaltax withholding and state tax (incertain states where required).You may elect to waive federaltax withholding if the distribution

will be used as housing allowanceand excluded from gross income.Also, withdrawals made while youare employed (including hardshipwithdrawals) before age 591 2,may be subject to an additional10% early distribution tax.

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All member and employercontributions are pretax; theyare not subject to federal incometax at the time they are contributedto the plan. Earnings on thesecontributions are also tax deferred.

For pastors, contributions arealso not subject to Social Securitytaxes or creditable toward SocialSecurity benefits.

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If you have made after-tax contributions(e.g., under a predecessor plan oroverseas employment after 1997),only the investment earnings on thesecontributions are subject to tax upondistribution.

Q. Can I use the housing allowance exclusion when I withdraw housingequity money held in any financial institution?

A. No. According to the IRS, you can claim the clergy housing allowance exclonly when receiving distributions from contributions made while you were aof the clergy if your account is held in a church-administered retirement plathe ELCA Retirement Plan). Church-affiliated or other fraternal organizationqualify for this exclusion.

Q. If I make member pretax contributions, do I pay Social Security tax onthese amounts?

A. No. Member pretax contributions are excluded from gross income for SociSecurity and federal income tax purposes.

Q. What is taxable for federal income tax purposes?A. Taxable income includes:

base salary, less pretax contributions earnings from other sources (i.e., for writing or speaking or gifts for pas

acts like weddings and funerals) any Social Security tax allowance paid to you furnishings and utilities allowance paid directly to you (if housing is pro

unless excludable as housing allowance

Q. What earned income is not taxable?A. You will not be taxed on the following income:

employer contributions made to the ELCA Retirement Plan housing equity contributions made to the ELCA Retirement Plan business expense reimbursements or allowances made under an accounta your pretax contributions to the ELCA Retirement Plan

Q. Am I an employee or self-employed?

A. Generally, the ELCA recognizes ordained ministers serving in congregatioas employees for federal income tax purposes. In most cases, such ordainedministers should receive an IRSForm W-2 .

The IRS recognizes all ministers as self-employed for Social Security tax pTherefore, you are required to pay your own Social Security taxes through quarterly estimates or withholding through theForm W-2 process (these taxes are filed as federa

taxes paid)

Q. If my congregation pays me an amount of money equivalent to half ofmy SECA taxes, is that amount included as part of my gross taxableincome?

A. Yes. If your congregation pays you an additional amount to cover what wohave been their employer FICA tax if you werent considered self-employeIRS says it must be included in clergy self-employment earnings and as ifor federal income tax purposes.

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You can obtain federal tax solutioevery day by contacting the IRSNational Taxpayer AdvocatesHelpline at (877) 777-4778. Youwill hear pre-recorded informatioabout office hours and locations, if you have a tax problem and wa

to make an appointment to talk wsomeone in person, leave a messaand an IRS representative will ret

your call.

How to access forms andpublicationsYou can access the IRS web site24 hours a day, seven days a weekat www.irs.gov to: download forms, instructions an

publications see answers to frequently asked

tax questions search publications online by

topic or keyword send comments or request help

via e-mail

You can also order forms andother publications by calling(800) 829-3676 or by visiting youlocal Taxpayer Assistance Center

Q. What if my household expenses are less than my designatedhousing allowance?

A. The amount of the difference is taxable income for income tax purposes.

Q. If I live in church-provided housing, do I pay taxes on the value of what is provided?

A. FOR INCOME TAXES : If housing is provided to you by your congregation for yourservices as a minister, you do not need to count the value of the housing as

taxable income even though it is part of your remuneration. In addition, if anyof your income is designated as a furnishings or utilities allowance, you may beable to exclude more from your taxable income according to the standard housingallowance limitations.

FOR S OCIAL S ECURITY TAXES : You need to include the fair rental value of the church-provided housing (including the cost of utilities paid by the employer) as incomefor Social Security purposes. Be sure you also include as income any amountof your pay that was designated as furnishings and/or utilities allowance whencalculating Social Security taxes.

Q. My congregation provides a parsonage and makes a housing equitycontribution to the ELCA Retirement Plan. What are the tax implications?

A. Housing equity contributions to the ELCA Retirement Plan are not taxed at the timethey are contributed. These contributions are eligible to be withdrawn at any timeand are designated as eligible for housing allowance exclusion when withdrawn.However, when you make a withdrawal, you must justify to the IRS how muchmay be excluded as housing allowance, based on 107 tax code limits. If youcannot justify the entire withdrawal as eligible for housing allowance, you will besubject to income tax on the difference and if under age 591 2, also subject to an IRSearly withdrawal penalty.

Q. If I purchase a home, can I claim the entire down payment plus themonthly housing expenses as housing allowance?

A. Generally, no. The IRS allows you to exclude the money you spend to purchasea home only if it is your principal residence and if you provide proof of howthe money was spent when you file your income taxes. The IRS sets limits on theamount of annual housing allowance you can claim. It is always the smallest of the amount officially designated in advance as housing allowance by your

employer or church organization amount actually spent for your primary residence (e.g., down payment,

mortgage principal and interest, utilities, taxes, insurance, furnishings,maintenance)

fair rental value of your home, including furnishings and cost of utilities(owned or rented)

Questions ordained ministers ask about ta

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If you have questions about thisinformation please contact theBoard of Pensions Service Centerat (800) 352-2876, e-mail us atmail@elcabop.org or visit our website at www.elcabop.org .

R www.irs.gov/faqs Social Security and Other

Information for Members of theClergy and Religious Workers (Publication 517)

Earnings for Clergy(Tax Topic 417)

Q. How much can I contribute to my retirement account through memberpretax contributions?

A. The annual maximum limit allowed in 2010 is $16,500. In certain circums you may be eligible to make additional contributions. Find the current annumaximum contribution limits atwww.elcabop.org . The limits are set annuallythe IRS and may be increased annually. Contact our Service Center to havemaximum amount calculated.

Q. When I convert my retirement savings into income after retirement, isthis income taxable?

A. Yes. Contributions to the Retirement Plan are tax deferred until you begin rdistributions. You would not pay federal income tax on any amount you areto justify as excludable for housing allowance.

Q. When I die, can my surviving spouse apply the housing allowanceexclusion to distributions?

A. No. The housing allowance exclusion is only available to pastors.

Q. Ive heard about a flexible spending account. What is it?

A. A flexible spending account (FSA) enables employees to set aside payroll don a pretax basis to pay for out-of-pocket expenses, including: certain health care expenses that are not paid for or reimbursed under

ELCA-primary health benefits eligible dependent day care expenses

Q. Who determines the rules that govern FSA plans?A. Because of the tax benefits involved with flexible spending accounts, the I

established specific rules that govern FSA plans.

Q. How will an FSA affect my income taxes and Social Security benefits?

A. The FSA enables you to reduce your taxable income, which in turn lowers your Social Security tax and federal and state income taxes for the year.N OTE : Some states may not recognize FSA plans for income tax purposes.

Q. Can I enroll in the ELCA Flexible Benefits Plan?A. If you are sponsored in the ELCA benefits program and you have ELCA-pr

health coverage, you can enroll in the ELCA Flexible Benefits Plan which iFSAs during the annual enrollment period indicating separate contributioamounts for the health care FSA and the dependent day care FSA. Your FSAelection(s) will remain in effect for that entire plan year unless you experienqualifying election change event.