The discussion of Medicare supplement subsidies is part of the larger context of all benefits, as well as compensation packages, provided to our clergy. A brief history of those benefits follows, focused mainly on the pension plans that The United Methodist Church has offered.
Throughout the generations, the church has owned a responsibility to care for its clergy during their active service and in their retirement. Historically, this took the form of modest wages, food, and shelter for the circuit riders, as well as care for their horses. Circuit riders’ life expectancy was only 32-35 years of age, so retirement was not much of a reality. Those who did live longer frequently kept preaching until their death.
As circuit riding gave way to resident pastors and modern itinerancy, modest wages and a home in which to live was supplemented by frequent meals, produce, crafts, in-kind gifts, discounts, etc. Retired pastors, however, were often destitute or living on the edge of impoverishment, dependent upon their communities who care for them as best they could.
During the first half of the twentieth century, we began providing a pension for retirement based on years of service. The annuity was the same for everyone, regardless of salaries earned during active service. Everyone who had served forty years received the same monthly amount, as did everyone who had served thirty years, everyone who had served twenty years, etc.
Health insurance born
As health insurance coverage was born, the former Methodist and Evangelical United Brethren Churches began providing health insurance for its clergy, with each Annual Conference designing its own policy, provisions and cost-sharing structure. For most conferences, including those in Indiana, the choice was made to also cover retirees, in part or in full, because it was the right thing to do out of love and concern for clergy. There was also a widespread need, as during times of moderate to high inflation, the modest annual increases in pension payments could not keep pace. The real dollar value of retirees’ pension income continued to lose ground.
That trend changed dramatically in 1982, when that annuity-based pension plan gave way to the Ministerial Pension Plan (MPP), which was a defined contribution plan until retirement, at which time the bulk of it, if not all of it (the choice rested with the individual clergy-person as to how much to annuitize and how much to receive as a lump sum), was converted to a lifetime annuity. This method of caring for our retired clergy provided a much more gracious retirement income, especially for those who benefited from the stock market boon of the 1990s.
As a defined contribution plan based on a percentage of salary, the MPP was not as equitable as its predecessor program, however, there was an equalizing benefit built into it: those earning less than the Denominational Average Compensation (DAC) had an additional contribution made to their account. The result was that all clergy, irrespective of income, received a pension at least equal to a salary package equivalent to the DAC.
Most clergy supplemented the church’s pension described above with their own contribution to the United Methodist Personal Investment Plan (UMPIP), usually an amount of three percent of their compensation. Prudent participants contributed even larger percentages of five, eight, and even ten percent to their UMPIP accounts. These participants, representing all salary levels, have better secured their retirement years.
The burst of the tech bubble
The burst of the tech bubble near the turn of the millennium revealed the vulnerability of the MPP, namely, risking an entirely defined contribution plan to potentially devastating losses. Thus, in 2007, the UMC turned to the current Clergy Retirement Security Program to moderate risk. CRSP is a blended plan with both defined benefit and defined contribution portions. The primary component to CRSP is the defined benefit, which once again provides the same benefit to all retirees based on years of service, regardless of compensation during active years.
Even with the adjustment to the CRSP benefit that takes place January 1, 2014, it remains an excellent plan for the care of our clergy in retirement. Within the context of the overall pension plan marketplace, United Methodist clergy are well cared for by the church. This is not to say that the pension alone will be adequate for clergy in their retirement years. Clergy must assume the responsibility to save for retirement in addition to the provisions provided by the church.
The new matching funds
The new matching funds element of CRSP encourages this practice of saving for retirement, though the modest 1% match created by the 2012 General Conference for implementation in 2014 is intended as merely an incentive for those clergy who are not already saving for their retirement years. Even the additional 2% match implemented by our 2013 Annual Conference, intended to assist clergy with health care costs in retirement, is simply a beginning in preparing for the future. While this article and publication in no way addresses individual financial goals and/or needs, it is safe to say that the more aggressively participants save, the more financial security they will build.
Excellent resources and tools are available at the General Board of Pension and Health Benefits website, www.gbophb.org, to assist participants with planning for their retirement years. In addition to a variety of pension assessment tools for retirement planning, participants also have access to Ernst & Young Financial Services, group life and disability plans, group rates for long-term care insurance, and more. The more you learn, the more empowered you will be.
The more aggressively participants save, the more financial security they will build.