This year's Session of our Indiana Conference forced all of us to learn a lot more about pensions and insurance than we (perhaps) ever wanted to know. Our discussions on that Friday afternoon of Conference were complex and confusing, and it became clear that we all need to learn even more about these issues if we are to fulfill our promises to provide for our clergy, spouses and surviving spouses in their retired years. So the past weeks I have been intentionally trying to learn more. Here are some things I have learned (but please understand that I am not the Pensions Officer for the Indiana Conference -- that role falls to Brent Williams, so you may want to talk with Brent to learn more -- and every clergy can also call our General Board of Pension and Health Benefits to ask specific questions about their personal benefits):
- Our Indiana Conference provides well for widows and surviving spouses. When an active pastors dies, we provide a full year's worth of free health insurance for the surviving spouse and family. After that we also provide $250/month to all surviving spouses for life -- to help them purchase insurance or Medicare Supplemental insurance. We don't even have a provision to end that subsidy if the surviving spouse gets re-married to someone who can support them well. We can be proud that our Indiana Conference follows the Biblical mandate to care for orphans and widows.
- We have greatly improved the pensions our retired clergy receive. The "old" pension plan for years served prior to 1982 is a defined benefit plan, and we vote every year at Conference to set the Past Service Year rate for those pensions. We have raised that rate consistently for over 40 years and this year we approved $659 per year (no matter what salary those pastor received while serving, their pension rate for those years is all the same). Still, those pastors whose retirement is primarily from those pre-1982 years will have less pension that those who have retired more recently with the majority of their years after 1982. Someone whose years of service are all pre-1982 (and that list of persons is of course shrinking) would receive a pension of about $24,000 per year if they served 35 years, or about $27,000 if they served 40 years. That amount does not include Social Security or other personal savings, and much of that pension amount can be considered tax-free toward housing costs. So we have improved those pension amounts, but those whose service years were all pre-1982 have the smallest pensions. It should be noted that our Indiana Conference is "fully-funded" for that pre-1982 plan, although the sudden stock market drop in 2008 and 2009 resulted in our being "under-funded" for a time. Fortunately our pension reserves carried us through those tough times, and we are once again fully-funded, based on projections of life expectancy, costs and service year rates.
- Since 1982 our newer pension plans have been even more generous. Our UMC moved to a "defined contribution" plan in 1982 and pastors also were asked to contribute a share into their PIP (Personal Investment Pension). Those funds, along with a generous church contribution called MPP, are deposited under each pastor's name by a percentage of income formula. However, every pastor whose salary was below the denominational average for any of those post-1982 years had their pension contributions from the church "lifted up" by the CPP program (Comprehensive Protection Plan) so that NO ONE received less that the average for those years. Of course those post-1982 pension plans grew rapidly during the 1980's and 1990's since those funds were invested in stocks and mutual funds, and the result is that pastors with years of service from 1982 to 2004 saw their pension fund become quite generous. Due to the perception that our pension funds were actually too costly for the churches and too generous, the 2004 General Conference modified the post-1982 pension plan into the new CRSP plan which is a combination of defined contribution and defined benefit. The result has been somewhat lower costs to the churches and less volatility in the pension funds -- to avoid large drops in the stock market producing a raid on our pension reserves. While the amount of pension received by an individual retired pastor is confidential information that we cannot know, a "typical" retired pastor with all of her or his years served under the post-1982 plan receives a generous pension. Those who served in lower-salary positions for their career are often surprised to find that the CPP program "lifted" their pension so that their pension and Social Security means that they have a higher level of income than the salary they received while serving.
- Our Indiana Conferences have always provided help for retiree health care -- currently through a subsidy based upon years of service to help them purchase Medicare Supplements. Right now every retired clergy in our plan receives those subsidies regardless of need or pension level. One idea that many people at Conference suggested was moving to a needs-based system to ensure that those retirees with lower pensions (mostly those with a majority of pre-1982 years) would be subsidized. As we heard at this year's Session, many of our more recently-retired clergy stood up and said they did not need their subsidy.
- Our new Indiana Conference in 2009 created a Compassion Fund which is administered by the Conference Board of Pensions and Insurance. That fund is used to help retired clergy and spouses who have special financial needs. To date, only a few persons have asked for such help, which either means not many are in need, or it could mean some persons are reluctant to ask for help. I believe it is important to encourage persons with genuine financial needs to see help from our Compassion Fund (and they can do so by simply calling the Conference Center and speaking to one of the staff who deals with clergy benefits).
- Our Indiana Conference is in a strong financial position, as long as we continue to make wise financial decisions. For example, our CFA was worked hard to develop balanced budgets, to monitor spending closely to avoid over-spending, and to build up a cash reserve of one month. That one-month reserve is something we need for cash flow purposes, because the local churches give their tithes slowly in the early months of the year, with a strong push at year-end to pay in full. CFA is very reluctant to have less than one-month of cash reserves on hand, for obvious reasons. Likewise, our post-1982 pension plan has been a defined-contribution plan so those funds are on hand but designated. The pre-1982 pension fund, however, is a defined-benefit plan and we need to be careful not to "raid" the monies on hand (actually on deposit with the General Board of Pensions) because those monies will pay for pre-1982 pensions at the rate voted each year at Annual Conference. Much like Social Security on a national level, it would be easy for any conference to spend down those reserves and risk not having enough funds to pay those benefits in future years. As I noted above, we actually dipped into an "under-funded" position in 2009 due to the dramatic drop in the stock market. So when people say we have "plenty of money" in our pension reserves, that is a true statement only as long as financial conditions are favorable. Our Conference Board of Pensions is reluctant to dip into those reserves because of the risks involved to future retirement pensions.
- Our Conference Directors (senior staff) met over the summer to develop a plan to balance the 2014 budget. As you remember, the Conference voted to maintain the current retiree subsidies for Medicare Supplements beyond what was recommended by the Conference Board, the CFA (Conference Council on Finance and Administration), and the Leadership Table, and that decision added several hundred thousand dollars to the 2014 budget. In order to balance that budget, our Directors are proposing we balance those added expenses in 2014 with these income streams:
- Taking $300,000 from our pension reserves (which will still leave us in a fully-funded position on those pre-1982 pensions as long as the US financial position is strong)
- Raising our estimate of income for the Tithe Budget by $200,000. That means we are trusting that all of our churches will do a better job of paying their fair share (tithe) in 2014. Our CFA gets nervous estimating higher than current projections, but we are trusting that the vote at our Conference Session to raise the budget meant that our churches (led by their pastors and Lay Members who voted at Annual Conference) will be even more faithful in paying their tithe share.
- Adding those together means that we can balance our 2014 budget without cutting other ministries. Again, that is the proposal from our Conference staff, and now we will process that proposal through the various decision-making groups of the Conference.
We must continue to study and discern methods for covering the expenses for our retired clergy in 2015 and beyond, and do so in a way which is financially sustainable for the long run. As should be obvious to everyone, we have a growing number of retired clergy and spouses, which will mean increased costs and obligations to care for their needs. So we have re-activated the Task Force on Retired Clergy Health Insurance to continue studying the issues and to bring proposals to the 2014 Annual Conference. I met with that group this summer and found them to be a very committed, capable group who have the expertise to understand these issues and to work for solutions that the Indiana Conference can consider.
We all should continue to pray for God's guidance and our own faithfulness to the various covenants we have as United Methodists - including our covenant to provide for our retired clergy, spouses, and surviving spouses.