Conscientious Objectors to Social Security

Transcript of Podcast Episode 128

The term “conscientious objector” is something that became popular during the Vietnam era. At that time, such a designation was used by some to avoid military service. According to the government’s Selective Service System, a conscientious objector is “one who is opposed to serving in the armed forces and/or bearing arms on the grounds of moral or religious principles.”

Of course, the military draft ended nearly 50 years ago. But the term conscientious objector lives on. Today, members of certain religious groups can legally opt out of Social Security on religious grounds. But it is not an easy thing to do.

For one thing, there needs to be a clearly documented reason for doing so. And simply reducing  expenses for the employee or the employer or both is not considered a legitimate reason. There is an IRS form that needs to be filled out (Form 4361), where they need to state their specific biblical grounds for opting out. They must be ordained, commissioned, or licensed by, or be a member of, a religious order that is exempt from federal tax as a religious organization, and they must oppose receiving public insurance because of their religious beliefs. The term “public insurance” includes Social Security and Medicare.

On Form 4361, the applicant must sign a statement that says, among other things, “I certify that I am conscientiously opposed to, or because of my religious principles I am opposed to, the acceptance… of any public insurance that makes payments in the event of death, disability, old age, or retirement; or that makes payments toward the cost of, or provides services for, medical care.”

Once the form has been filed, the applicant will receive a letter from the IRS that they must sign. This letter is meant to verify the applicant’s grounds for the exemption.

Keep in mind that the exemption applies only to income earned as a member of the clergy. Any other income earned outside of the clergy will still be subject to Social Security tax, and if they worked more than 10 years in a secular job, they will receive a Social Security benefit anyway, although it will be smaller than if all of their income was counted.

A decision to opt out of Social Security on religious grounds is generally irrevocable. Although there have been several occasions when Congress has offered the opportunity to opt back into Social Security, there is no current option to do so.

Although it’s not the reason people do this, the potential financial advantage to opting out is magnified for clergy who are considered self-employed. Withholding taxes are 6.2 percent for Social Security and 1.45 percent for Medicare—for both the employee and the employer. So for anyone who is self-employed, that works out to a total of 15.3 percent of their income that could potentially be saved.

But let’s not lose track of the most important thing: for most Americans, Social Security is their most important source of retirement income. If you’re going to opt out, you need to plan accordingly. This means carefully building your own retirement savings plan.

Sources

Artiga, Amy. “How Do Pastors Opt Out of Social Security?” PastorsWallet.com, August 3, 2020. Accessed April 17, 2021.https://pastorswallet.com/step-step-guide-opting-social-security/.

IRS. “About Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers.” irs.gov, February 18, 2021. Accessed April 17, 2021. https://www.irs.gov/forms-pubs/about-publication-517.

Rivera, Paul. “4 Reasons Why Ministers Should Opt-Out of Social Security.” StartChurch.com, September 15, 2016. Accessed April 17, 2021. https://www.startchurch.com/blog/view/name/4-reasons-why-ministers-should-opt-out-of-social-security.

Selective Service System. “Conscientious Objectors.” sss.gov. Accessed April 17, 2021. https://www.sss.gov/conscientious-objectors/.

This podcast is designed to provide general information regarding the subject matter covered and is believed to be current as of the date of publication. It is not intended to serve as legal, tax or other financial advice related to individual situations, because each person’s legal, tax and financial situation is different. Security Mutual and its agents may not give legal or tax advice.

This information is not approved, endorsed or authorized by the Social Security Administration, Centers for Medicare and Medicaid Services or the Department of Health and Human Services. Reliance on the information should be undertaken only after an independent review of its accuracy and, where applicable, in consultation with your tax, legal or other professional advisors regarding your specific situation.