Ministers are treated as self-employed for the purpose of Social Security/Medicare payments. This is referred to as “dual tax status.” Because of this, ministers are eligible for the “in lieu of FICA" payment (also known as a self-employment tax offset).
Ordinarily, the Social Security/Medicare tax (currently 15.3% of salary) is shared equally between employer and employee in the form of the FICA (Federal Insurance Contributions Act) tax. But because the minister is considered self-employed for Social Security/Medicare purposes, they pay the full amount themselves. To make up for the higher tax paid by the minister, the UUA recommends an “in lieu of FICA” – or Self-Employment Tax Offset – payment for ministers. This payment is in lieu of the employer share of FICA.
A more detailed review of In Lieu of FICA payments is included in the Ministerial Compensation 101 article.