Pension agency temporarily halts base credit on fund
2/24/2003 News media contact: Tim Tanton · (615) 742-5470 · Nashville, Tenn. By United Methodist News Service The
United Methodist Church's pension and health benefits agency is
temporarily suspending the 3 percent base-interest credit that it pays
on accounts in its Diversified Investment Fund. The action, taken in
response to uncertainty in the world and financial markets, is effective
March 1.
"As always, the general board's actions are based on a
consistent strategy of protecting the long-term security of participants
and their beneficiaries," said Barbara Boigegrain, top staff executive
of the United Methodist Board of Pension and Health Benefits in
Evanston, Ill.
The board said that its suspension of the base
credit would strengthen its ability "to deliver on current and future
benefit promises." The Diversified Investment Fund is the agency's
largest pool of investment dollars, with $8.5 billion in assets.
The
suspension of the base-interest credit will affect about 40,000 active
clergy and lay employees of the United Methodist Church, according to
agency spokesman Michael Lee. Those are employees with accounts in the
Ministerial Pension Plan (MPP), Staff Retirement Benefits Program (SRBP)
and the Cumulative Pension and Benefit Fund (CPBF).
In November
2000, the board lowered its base credit rate on the fund from 6.5
percent to 3.0 percent for the first time since the 1970s, as the
long-running U.S. bull market reached its end. Since then, the financial
markets have struggled, and conditions have been exacerbated in recent
months by uncertainty about a possible U.S.-led war with Iraq.
"As
a result of the extended bear market - the second worst in the history
of the U.S. stock market - action is needed to prevent further
deterioration of DIF's reserve position that occurs when the 3 percent
base-credit interest is paid," the board said in a statement.
While
the base-interest credit is suspended, the board won't apply any
interest to deposits in the fund. "No action is required by
participants," the agency said. "Account balances will continue to
reflect existing and future contributions, and any interest earned
through Feb. 28, 2003." When the markets improve and the fund's reserve
position is stronger, the agency said it would consider reinstating the
base credit.
"DIF remains a viable and reliable investment
vehicle largely because of the actions of the board of directors over
the last several years," said Dave Zellner, managing director of finance
and investments.
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