As the former Indiana conferences were preparing to create the new Indiana Conference, the Imagine Indiana Design Team had provided the goal of creating something new, utilizing a blend of best practices of the two former conferences, creative visioning, and inspired discernment.
Applying that goal to the area of benefits, the Benefits Design Team was directed to bring a proposal that would aim for the highest benefit thresholds of those offered by the two previous conferences whenever feasible. Since one conference had already ceased providing subsidized health coverage to persons retiring after December 31, 2005, and the other conference was still subsidizing a portion of the HealthFlex Medicare Supplement, the Benefits Design Team prepared a proposal that would offer a subsidized benefit to all retirees.
As work was being done on this proposal, the Benefits Design Team learned that HealthFlex would soon be dropping its Medicare Supplement options. When this work was being done in 2008-2009, the variety of Medicare Supplements being offered on the open market was beginning to increase dramatically. The Benefits Design Team then began looking at the subsidy model instead of limiting the choices of available plans for retirees.
The initial proposal brought to the Imagine Indiana Team in January of 2009 was to provide a subsidy of $350 for those who had 20+ service years and a lesser subsidy for those with fewer service years. The annual cost of this proposal would have been $3.5+ million.
The Council on Finance and Administration (CF&A) was also working towards a blended budget as the Imagine Indiana Team, the Benefits Design Team, and the many other area teams were working to create the new Indiana Conference. As CF&A was arduously trying to bring a balanced 2010 budget to the 2009 Annual Conference, they were confronted with the reality that the Board of Pensions and Health Insurance budget was the only workable area to cut expenses to meet anticipated tithe income.
Please remember that these were sisters and brothers on CF&A who were genuinely wrestling with the implications of cutting the Board’s budget. That this would directly affect the lives of faithful servants who were now retired and on fixed incomes was not lost in their conversations. They could not in good conscience, however, bring to Annual Conference a budget that would not represent wise stewardship of the conference’s resources by virtue of a balanced budget.
So in February of 2009, CF&A went to the Board of Pensions and Health Insurance requesting it to find a way to cut its budget from $3.5 million to $1.5 million. The current subsidy structure of $5 per service year up to a maximum of 30 years was chosen as the best and most viable option to meet the CF&A’s request and still provide at least a modest subsidy to retirees.
The initial $5 per service year proposal did not have specific Medicare supplement plans tied to it. Retirees were going to be given resources to shop for the plan that best fit their individual needs. However, because of retiree feedback to this proposal, the Board worked with the conference’s benefits consultant to add the current two-tier supplement plan to the proposal in the weeks leading up to the 2009 Annual Conference.
Thus, the current subsidy was born on Jan. 1, 2010 (having been adopted by the 2009 Annual Conference). The actual cost of the subsidy has been about $1.75 million, so the $1.5 million built into the budget was supplemented by income from the Indiana U.M. Foundation (which holds the endowment that was initially called the “Worn-out Preachers Fund”) and from health insurance reserves.
In the springs of 2011 and 2012 (for the 2012 and 2013 budget years), the $1.5 million budgeted item from the tithe was further pared to $1.0 million, forcing the Board to be creative in finding funds to continue the subsidy at the current levels. Most of the additional funds were from health reserves, which have been spent down to a critical level. We no longer have enough reserves to supplement the cost of the subsidy with major dollars.
Additional funds have been drawn from pre-1982 overfunded pension reserves. The conference must be extremely cautious about utilizing this source, however, because the level of overfunding is such that it is quite vulnerable to down swings in the market. The conference learned this the hard way in 2008, when these reserves actually dipped to an underfunded level. Therefore, drawing from these reserves is not a viable alternative for the long-term, as they must be protected to fulfill the obligation the conference has to those for whom it exists, namely, those with pre-1982 service years.
With CF&A’s 2012 request (for the 2013 conference budget) to hold to the $1 million line item for the subsidy, the Board of Pensions and Health Insurance realized the unlikelihood that the tithe income would ever increase back to the $1.5 million necessary for the current subsidy to be viable for the long term. Thus, the Board took to the 2012 Annual Conference a request to have Bishop Coyner name a Retiree Health Insurance Subsidy Sustainability Study Task Force. This Task Force was to study possible alternatives to the current subsidy that would be viable for the long-term, taking its recommendation to the Board by February of 2013.
Having considered multiple alternatives, the Sustainability Study Task Force proposed an option that would take care of widows and widowers of deceased clergy, those retirees with the greatest need (mostly those with several pre-’82 service years), and all clergy who retired by July 1, 2013. This option would allow all retirees currently receiving a subsidy to continue receiving that subsidy, though at the reduced rate of $4 per service year (instead of $5), and still up to a maximum of thirty service years. This option would cost the Annual Conference approximately $1.25 million, $1 million to be underwritten by tithe income, and the bulk of the balance underwritten by the funds held at the Indiana U.M. Foundation. This met the two most significant goals of providing the subsidy to those with greatest need and being sustainable over the long-term.
The Board concurred with the Task Force’s proposal, having also considered a number of alternatives. It was that proposal, then, that was to be presented to the 2013 Annual Conference.
Hearing concern that retirees nearing retirement needed more time to plan for not having the subsidy, the Board altered the proposal to include retirees up to and including the retiring class of July 1, 2014. It was that adjusted proposal that was acted upon and denied by the body of the Annual Conference. This action left in place the current subsidy of $5 per service year, up to a maximum of thirty service years, for all retirees, past, present and future.
Thus, the Annual Conference still must decide how it is going to fund this benefit for the long-term, adopt an alternate, less-costly benefit, cease providing the benefit altogether, or for whom the benefit will and will not be provided.
As we make these decisions, we must remember that the 2% matching funds paid into the pastor’s UMPIP account, which the 2013 Annual Conference adopted for implementation in 2014, is intended to assist clergy with health care costs in retirement. This match encourages clergy to save an additional 1% or 2% of plan compensation (over and above the DC 1% match), with the local church matching that 1% or 2%, for a potential total of 4% of plan compensation (2% by participant + 2% by local church) being invested for retirement health care costs.