SECA (Self Employed Contributions Act) taxation of retirement plan distributions/conversions has not been thoroughly addressed by the IRS. The determination of whether SECA is due is very fact-specific. The only codified IRS guidance available is found in Code section 1402(a)(8) which provides that SECA is not due by a duly ordained, commissioned, or licensed minister for “…any retirement income received by such individual from a church plan…after the individual retires.” However, the tax code is not clear on the definition of “retires” in this case.
For a “pre-retirement” distribution, i.e., a distribution prior to any level of termination of employment, it may be hard to argue the minister is retired. However, some practitioners feel that distributions on or after age 59 ½ may be eligible for such treatment, and therefore not subject to SECA, regardless of employment status.
Because there is no clear guidance, ultimately it is up to the minister and their tax advisor to determine whether SECA taxes are due in various circumstances.
For more information on ministerial tax issues, please view our Ministers' Tax Guide.