By Ed Tomlinson
A choice between two pension plans looms for delegates at the 2012 General Conference. Both options presented by the General Board of Pension and Health Benefits will reduce the cost to annual conferences by 15 percent.
While benefits going forward will not be as generous as the current plan, the action was taken in response to the annual conferences’ concerns about pension costs.
These observations were supported by research done by the Sustainability Advisory Group, data concerning declining membership, the average age of members, and increased costs based on actuarial valuations. Consequently, to continue the present level of pension benefits is deemed by many as “fiscal irresponsibility.”
Under the recommendations, current retirees will have no change in pensions now being paid or already earned. Participants nearing retirement will see a difference of .25 percent of Denominational Average Compensation per year beginning in 2013.
The preferred plan of the board continues the hybrid Defined Benefit/Defined Contribution approach used presently. In other words, the Defined Benefit is 1.25 percent of the Denominational Average Compensation (DAC) times years of service since 2007. Going forward, the new percentage is 1 percent of the DAC. Instead of 3 percent of actual compensation as the amount billed for the Defined Contribution piece in force now, the new plan will have a base of 2 percent with 1 percent to be added when the participant contributes 1 percent.
The alternate proposal is solely a Defined Contribution plan (which was requested by some annual conference leaders and affirmed by petitions submitted to General Conference). The local church or paying unit would make an 8 percent of compensation payment. Then, up to 2 percent of compensation would be matched as like payment is received from the participant.
Investment risks and the participant’s longevity are born chiefly by the employer or sponsor in a Defined Benefit plan. While the plan does indicate a monthly pension for life, it produces fluctuating costs to the annual conference.
While the expense with the Defined Contribution is readily determined, this plan finds the participant carrying the risks of longevity and investment. Investment conditions during the participant’s service can make for uncertain benefits. The participant could fare better or worse than with the Defined Benefit.
In the opinion of the General Board, the risk should be shared between the plan sponsors (e.g., the annual conference or other employing unit) and the participant. Hence, the preferred option is a modification of the current Defined Benefit/Defined Contribution Plan with modifications to make it more affordable.
Debate at General Conference is sure to include the escalating costs to annual conferences, confidence in the sustainability of the plan, the concern about attracting bright young persons to the ordained ministry of our denomination, care for clergy who have several years left in effective ministry, and a host of related issues
Ed Tomlinson has been elected as a clergy delegate to four General Conferences. In 2004, he served as Chairperson of the General Administration Legislative Committee which formed the Connectional Table. He is a current director of the General Board of Pension and Health Benefits and a member of the Church Systems Task Force formed by action of the 2008 General Conference. This article orlginally appeared on the North Georgia Conference website and is reprinted with permission.