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Agency readies pension proposal for General Conference

3/26/2003 News media contact: Tim Tanton · (615) 742-5470 · Nashville, Tenn.

By United Methodist News Service

The United Methodist Church's pension programs would be strengthened and expanded under a proposal going to the denomination's top lawmaking assembly next year.

Directors of the church's Board of Pension and Health Benefits, meeting March 20-22 in Louisville, Ky., voted to present the proposal to the General Conference. The assembly, which gathers every four years, will meet April 27-May 7, 2004, in Pittsburgh.

The board also affirmed the decision it made last November to change its annuity conversion policy from a fixed rate to a variable market-based rate this summer.

"The board's endorsement to proceed with the new pension plan, coupled with an affirmation of its annuity conversion policies, strengthens our ability to meet current and future retirement processes to clergy and lay persons employed by the church," said Barbara Boigegrain, top staff executive of the board in Evanston, Ill.

When it goes to General Conference next year, the board will propose a combined defined benefit and defined contribution core pension program for clergy that would begin Jan. 1, 2007. The defined benefit piece would provide a monthly payment in retirement. The defined contribution part would provide an employer contribution equal to 3 percent of a person's compensation.

Annual conferences also would be able to offer an optional defined contribution plan along with the core benefits. The additional defined contribution benefit could include matching contributions of up to 6 percent of compensation and a variety of distribution options, such as cash installment payments, lump sum distribution, and annuity conversion through an insurance company or mutual fund organization.

For lay workers of the church, the board affirmed a recommendation for a new, mandatory pension plan. The plan would provide benefits to lay workers in local congregations - such as secretaries, choir directors and musicians - and extension ministries. General agency and annual conference lay workers are already covered by the board's existing plans.

With the new defined contribution plan, sponsors would be expected to contribute 3 percent of each enrolled employee's compensation to the program. "If passed by the General Conference for implementation January 2007, it will be the first time lay workers would be able to receive uniform retirement benefits across the nation," the agency said in a press release.

Documentation is being prepared for the proposal to General Conference. The board will vote on the plan document when it meets in July, said spokesman Michael Lee.

The agency also is developing a "broad-based communications" plan to help the church understand the proposed changes, Lee said. The plan will include meeting with small groups of people that represent constituencies within the denomination, he said.

During the board meeting, the directors affirmed their new annuity conversion policy. Effective July 2, retirees who elect to convert their pension account balances to annuities will do so at a floating, market-based rate instead of at a fixed rate. Clergy members who have reached age 62 or 35 years of service will be "grandfathered" in with the fixed rate, an exception based in part on the "unique covenant relationship" between the church and its clergy, as well as the fact that clergy must convert to annuities upon retirement, while lay retirees have other options available.

With a current fixed rate of 8 percent and market rates in the 5 to 6 percent range, the board has been paying above-market returns on annuities. That money has been coming out of reserves.

"The board carefully considered requests from leadership of two general agencies to change the timing and scope of converting retirement account balances for staff from a fixed 8 percent annuity conversion rate to a market-related variable conversion rate," the agency reported. "Upon careful study and reflection, the board determined that the original decision best upheld the interests of the greatest number of people."

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