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Downturn prompts questions on clergy pensions

 
This chart and the chart below display the value of fund assets
for each of the funds managed by the United Methodist Board of
Pension and Health Benefits as of Dec. 31, 2008, and Dec. 31, 2007:
Source: General Board of Pension and Health Benefits' 2008 Annual Report

A UMNS Report
By Linda Bloom and Kathy Gilbert*

Dec. 21, 2009

The impact of the prolonged economic downturn is leading some in The United Methodist Church to call for an examination of how its U.S. clergy pensions are funded.

While the plans administered by the United Methodist Board of Pension and Health Benefits remain solvent, the denomination’s 62 U.S. regional bodies, or annual conferences, are concerned about escalating contribution costs.

Jean Edin, president of the Association of United Methodist Conference Pensions and Benefits Officers, said the economic decline has left some conferences scrambling to find replacement funds for their future obligations.

“Some of the conferences were projected to be 100 percent funded before the market crash. But because of the market crash those assets are no longer in the plan, so all of a sudden they are not 100 percent funded anymore,” she explained.

Although everyone realizes that stock market fluctuations can have an impact, “the 2008 crash made us more aware of what could happen,” Edin said.

Clergy themselves are feeling some uncertainty about what level of support their pension plan will provide for retirement years. “A lot of us are saying we cannot assume what we used to assume,” said the Rev. Dean Snyder, 62, a clergy member of the Baltimore-Washington Conference.

That uncertainity could push some pastors to keep working until the denomination’s maximum retirement age of 72.

“A lot of my clergy friends in my age group are revising their thinking about when they might be ready to retire,” explained Snyder, who is the senior pastor at Foundry United Methodist Church in Washington. Others, he said, are considering what kind of work they would be willing to do part-time.

 

Call for special session

The General Council on Finance and Administration, the denomination’s financial agency, has asked the Council of Bishops to call a special session of General Conference, the church’s top legislative body, to consider both clergy pensions and a reorganization of church structure. The request, which also includes the possibility of an outside actuarial review of the pension plan, will be discussed when the council’s executive committee meets in January.

Only General Conference could reduce pension benefits for current or future clergy retirees in what currently is the largest faith-based pension fund in the United States.


Bishop B. Michael Watson presides over a session of the 2008 United Methodist General Conference in Fort Worth, Texas.
A UMNS photo by Mike DuBose.

But the denomination must determine if holding a special session of that body “would be worth the significant financial investment,” the pension agency’s executive staff said in a written response to United Methodist News Service.

“It would take time to calculate the effect on pension contributions of any changes that were made, and they would likely not be available for any earlier annual conference budget cycle than if the changes were made at the regularly scheduled General Conference in 2012,” they added.

“The denomination needs to recognize that the shortened time frame resulting from a called session would mean that benefit examinations currently underway… would be cut short, reducing (the pension board’s) ability to provide information that is necessary to fully inform the decisions that a called session would make.”

Engaged in conversation

During the past year, the pension agency has been engaged in conversation with annual conference treasurers and pension officers about the economy’s potential impact on the pension plans, which would affect contributions for 2011 and beyond.

Bishop B. Michael Watson, chairperson of the pension board’s board of directors, said the agency is “trying to find a balance” between its responsibility to participants in the clergy pension program and the needs of annual conferences and local churches.

 
The Rev. Dean Snyder

In July, pension directors approved a “premium holiday” for the Comprehensive Protection Plan under which conferences provide disability and death benefits. That action is expected to put in excess of $110 million back into the conferences over a three-year period.

The “financial strength” of the conferences “varies greatly,” the bishop pointed out. “Knowing the absolute reality concerning every annual conference is probably something we could do better, that the church could do better,” he said. “So far, in our history, every annual conference has carried out their responsibility well.”

After the premium holiday was instituted, pension staff officials have “not been informed” that any conference will not be able to make its 2011 contribution.

But it is acknowledged that the 2011 net increase will still “represent a jump” from current contributions for a few conferences, and the pension agency is trying “to determine how well-positioned they are to make the contribution.”

The increase for 2011 is the currently “greatest concern” for the Association of United Methodist Conference Pensions and Benefits Officers, Edin said.

Before the special session was requested by GCFA, the association sent a resolution in October to the Council Of Bishops, asking that a day be set aside at the 2012 General Conference to focus on pension legislation. The idea behind the request, according to Edin, is to ensure a full discussion of the pension plans rather than a quick decision.

Clergy currently are covered by the Clergy Retirement Security Program, which dates to the beginning of 2007. Retirees also are paid under the previous Ministerial Pension Plan, which was in effect from 1982 to 2006 and provides a lifetime annuity, and under what Edin referred to as the “pre-1982 plan.”

Pension valuations for 2011

Pension valuations – or the value of the plans at a given point in time – produced by board actuaries and sent to conferences this fall for 2011 were based on a Jan. 1, 2009, financial snapshot, “the first time any of our valuations showed the market losses of 2008,” Edin said.

Any market recovery would not be reflected until the next valuation, so that the 2009 calendar year, which would affect the 2012 valuation, “can have wonderful market returns but it is not going to affect what we have been told is our amount due for 2011,” Edin said.

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The Minnesota Conference, where Edin is the pension officer, is still 100 percent funded for its 2011 contribution, but only because it had exceeded 100 percent funding. Minnesota’s contributions to the pre-1982 pensions, based on minimum valuation from Board of Pension and Health Benefits for 2010, were 164 percent funded. Funding for the 2011 contribution dropped 42 percent to 122 percent.

“For those conferences that were funded but are now found to be underfunded, they are looking at having to come up with money… in an economy where giving in church is difficult, to say the least,” she said.

Snyder said he never assumed that a good pension was a lifetime guarantee, but he noted that the clergy culture implied that playing by the rules and paying dues would provide a secure retirement.

He has found the Board of Pension and Health Benefits to be “pretty accountable” in providing access to information on individual accounts, but thinks the board must “work very hard at transparency in this kind of situation.”

In the long run, Edin pointed out, the denomination must determine how to make the pensions financially “sustainable” while providing a “quality” benefit program for clergy. “They are giving a career’s worth of time for the most part,” she said. “We want the benefits to be sustainable...so they can have a decent retirement.”

*Bloom is a United Methodist News Service news writers based in New York. Gilbert is a UMNS newswriter based in Nashville.

News media contact: Linda Bloom, New York, (646) 369-3759 or newsdesk@umcom.org.

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Resources

Board of Pensions

General Council on Finance and Administration

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