Clergy Get Second Chance at Social Security: New Bill Allows Opt-In After Previous Exemption

The "Clergy Act" is a straightforward piece of legislation that gives clergy members a second chance to opt into Social Security, even if they previously chose to be exempt. Here's the breakdown:

Back in the Fold

This bill directly addresses a specific group: members of the clergy who, at some point, opted out of Social Security coverage under section 1402(e)(1) of the Internal Revenue Code. Now, they get a window to reverse that decision. The main action is the revocation of that exemption. Think of it like hitting 'undo' on a choice they made, potentially years ago.

The Opt-In Timeline

• Deadline: Clergy have until the due date of their federal income tax return for the second taxable year starting after December 31, 2027. Essentially, they have a couple of years after 2027 to decide.
• Effective Date: The revocation can be effective for either the first or second taxable year after December 31, 2027, as specified in their application. So, they can choose to start getting coverage in either of those years.
• Irreversible: Once they opt back in, it's a done deal. No going back to being exempt. (SEC. 2)

Real-World Impact: A Hypothetical

Imagine a minister who opted out of Social Security decades ago, relying on personal savings and a church pension. Now, facing unexpected health issues or a change in their financial situation, they might want the safety net of Social Security. This bill gives them that option. If they choose to revoke their exemption, they'll start paying self-employment taxes and, eventually, become eligible for Social Security benefits. This could mean access to retirement income, disability benefits, and Medicare.

Catch-Up Payments

There's a catch, though, and it's a practical one. If a clergy member files their revocation after the tax return due date but wants it to be effective for that year, they have to pay up. Specifically, they need to make a lump-sum payment of all the self-employment taxes they would have owed, without certain exclusions they might have previously used. (SEC. 2)

Getting the Word Out

Within 90 days of this Act becoming law, the Commissioner of Internal Revenue and the Commissioner of Social Security have to present a plan to the House Ways and Means Committee and the Senate Finance Committee. This plan is all about informing ministers, members of religious orders, and Christian Science practitioners about this new opportunity to opt back into Social Security. (SEC. 3). It is important that everyone affected understands the actions they need to take and the deadlines involved.

The Bottom Line

The Clergy Act essentially offers a do-over for clergy members regarding Social Security. It's a targeted bill with a clear, practical impact: potentially providing a financial safety net for those who previously opted out but now want to participate in the system. It's worth noting that this also means more contributions flowing into Social Security, which could have a small but positive impact on the system's overall finances.