2016 CAL-PAC LEGISLATION REC 16-3
PENSIONS 3 – COMPREHENSIVE BENEFIT FUNDING PLAN
A Comprehensive Benefit Funding Plan is a formal funding plan that describes how to pay for benefit obligations, including those obligations that are dependent on the conference continuing its current benefit programs. This plan balances benefit design with benefit funding—realistically aligning design expectations with funding patterns. As a result, the conference is better able to plan for the payment of all benefit obligations. The necessity of transparency concerning benefit funding has been a common theme throughout the connection in many settings. The General Board of Pension and Health Benefits requires each conference to publish and gain approval for their conference’s Comprehensive Benefit Funding Plan. All the components of the plan that were previously reported individually, including the pre-82 past service rate, are now reported collectively as part of the comprehensive plan.
Clergy Retirement Security Program (CRSP) Defined Benefit (DB) and Defined Contribution (DC)
The Clergy Retirement Security Program (CRSP) is an Internal Revenue Code section 403(b) retirement program providing lifetime income and account flexibility designed for those who serve God as clergy of The United Methodist Church. CRSP replaced the Ministerial Pension Plan (MPP) effective January 1, 2007. CRSP consists of both a defined benefit (DB) plan, which provides a monthly benefit at retirement based upon years of credited service to the Church, and a defined contribution (DC) plan, which provides a retirement account balance established and funded by annual conferences. CRSP-DB The total denominational liability for CRSP-DB annuities as of 1/1/2015 is $1.2 billion, the total plan assets are $1.4 billion, and the current funded ratio for the plan is 110.73%. The California-Pacific Conference’s portion of the total liability is 1.98%, and the conference has elected to include 50%+ for FTE eligibility for 2017. As a result, the required contribution due as of 12/31/17 is $2,066,561. It is anticipated that the amount will be funded from New Incoming Money, through direct billing to churches, totaling $2,066,561. The total account and/or future incoming money covers the required contribution. CRSP-DC Effective January 1, 2014, the CRSP-DC plan was reduced from a 3% to a 2% of plan compensation nonmatching contribution. Clergy have the opportunity to earn up to an additional 1% CRSP-DC contribution by contributing at least 1% of their plan compensation to UMPIP. Therefore, if a participant contributes at least 1% of plan compensation to UMPIP, the participant will receive a contribution of 3% to CRSP-DC. The 2015 contribution was $499,080 and was funded by required contributions billed to local churches. It is anticipated that increases for future years will average 3% due to the overall average salary increase for clergy of 3%. As clergy salaries increase, the CRSP-DC contributions increase because CRSP-DC is calculated as a percentage of the pastor’s plan compensation (salary plus housing).
PR-64
2016 CAL-PAC LEGISLATION Ministerial Pension Plan (MPP) The Ministerial Pension Plan (MPP) provides clergy with a pension for their years of ministry with The United Methodist Church from 1982 through 2006. MPP was replaced by the Clergy Retirement Security Program (CRSP) effective January 1, 2007. However, if a pastor has an MPP account, it will continue to be invested, and he/she will receive benefits from the plan as before. MPP is an Internal Revenue Code section 403(b) retirement plan. Upon retirement, exactly 65% of the account balance must be annuitized when it is to be distributed. The remainder may be rolled over to UMPIP, another qualified plan or IRA, or paid in a lump sum. The total denominational liability for MPP annuities as of 1/1/2015 is $3.1 billion, the total plan assets are $3.5 billion, and the current funded ratio for the plan is 112.38%. Future MPP annuitants have a total account balance of $4.1 billion, and the California-Pacific Conference’s portion of that balance is $86 million, or 2.08% of the total. There is no required contribution for 2017. Supplement One to the Clergy Retirement Security Program (Pre-82) Supplement One to the Clergy Retirement Security Program (CRSP), also known as the Pre-82 Plan, provides clergy with a pension for their years of ministry with The United Methodist Church prior to 1982. The Pre-82 Plan was replaced by MPP effective January 1, 1982. However, if a pastor was eligible to participate and was vested in the Pre-82 Plan, he/she will receive benefits from the plan as before. For 2016, the Past Service Rate (PSR) is $688. For 2017, the conference is increasing its PSR to $702. On average, the conference cautiously estimates future increases to be approximately 2%, but will thoroughly evaluate each year. The contingent annuitant percentage is at the 100% level. Based on the final actuarial valuations from the General Board of Pension and Health Benefits as of January 1, 2015 for 2017, the portion of the Pre-82 liability attributable to the California-Pacific Conference and funded status as of 1/1/15 is as follows: Funding Plan Liability as of 1/1/2015: ($55,490,981) Plan Assets as of 1/1/2015: $68,593,310 Current funded status is $13,102,329 for a 124% funded ratio. The conference does not intend to redirect Pre82 surplus. Key assumptions: 6.75% discount rate, using the RP2000 mortality table with a BB generational projection. The conference is fully funded in the Pre 1982 pension plan for this funding plan, so there is no need to project New Incoming Money.
PR-65
2016 CAL-PAC LEGISLATION Post-Retirement Medical Benefit Program The Post Retiree Medical Plan currently offered in 2016 and anticipated for 2017 can be described as follows: Retirees, spouses and surviving spouses are offered a Health Reimbursement Account (HRA) if they purchase health insurance through a private Medicare exchange called OneExchange. The HRA is funded through apportionments. To determine how much each participant receives into their HRA, a target HRA amount is established. Each participant receives a portion of the targeted amount based on the pastor’s years of service. The target HRA for 2016 is $2800 per retiree, spouse and surviving spouse. For participants who retired prior to 1982 or have attained age 85, there is a flat reimbursement of $3350. Participation in the Health Reimbursement Account program is optional. At the time of this submission, the post-retirement medical valuation for 12/31/15 has not been completed. Therefore, the information below, highlighted in yellow, is carried forward from 12/31/14. With the migration to a Health Reimbursement Account, rather than the sponsorship and subsidy of a specific plan, it is expected that the Accumulated Post Retirement Obligation (APB) noted below will be reduced by approximately 25%. The current annual cost is anticipated to be $2,201,398. The subsidized portion is obtained through apportionments, and the remainder through direct billing the retiree participants. There is also a small reserve for future retiree health care held on account at the General Board of Pensions. The following is based on the most recent actuarial valuation dated as of 12/31/2014, prepared by Southern Actuarial Services: Expected Post Retirement Obligation (EPBO) (net conference cost): $35,630,000 Accumulated Post Retirement Obligation (APBO) (net conference cost): $25,650,000 Service Cost (SC) (net conference cost): $662,000 Active Health Benefit Program The California-Pacific Annual Conferences offers two fully insured HMO health plans to active participants. Although participation in the conference plans is optional, conference health care rules require clergy and their spouses/families to be covered under an adequate health plan at the expense of the church. Conference lay employees and clergy appointed to conference staff positions are also enrolled in the conference health plan at the expense of the conference. During the calendar year 2015, the total cost for the active health program was $3,210,138. The active health program was funded from direct billing to churches. For conference lay employees and clergy appointed to conference staff positions, the health program was funded through apportionments. Future increases are expected in the range of 10%. Rate increases are due to a combination of claims experience and market conditions. Comprehensive Protection Plan (CPP) The Comprehensive Protection Plan (CPP) is a welfare benefit plan established for clergy by the General Conference of The United Methodist church effective January 1, 1982. The plan provides death and longterm disability benefits for eligible clergy, and is an Internal Revenue Code 414(e) “church plan funded by plan sponsor insurance premiums. PR-66
2016 CAL-PAC LEGISLATION For 2017, the California-Pacific Conference has an annual required contribution to the Comprehensive Protection Plan of $743,400. The anticipated increase in obligation for future years will be approximately 3.0% per year. This expected increase is due to an average clergy compensation increase of approximately 3.0% per year. The CPP premium increases in the same amount since it is calculated as a percentage of salary. The source of funding for this benefit is direct billing to the churches where eligible clergy serve. Premiums for clergy appointed to conference staff are funded through apportionments. Other Benefit Obligations United Methodist Personal Investment Plan (UMPIP) UMPIP is an Internal Revenue Code section 403(b) defined contribution retirement savings plan for clergy and lay employees of The United Methodist Church. Participants may make before-tax and/or after-tax contributions through payroll deductions. Participant contributions, contributions the plan sponsor may make on the participant’s behalf, and investment earnings comprise the individual’s retirement account balance. For lay staff of the Annual Conference, the conference contributes the equivalent of 7% of the employee’s salary to the plan. Currently (for 2016), the California-Pacific Conference has an annual estimated contribution to the UMPIP of $134,000. The anticipated increase in obligation for future years will be approximately 3% per year. This expected increase is due to an average lay staff increase of 3% per year. The UMPIP contribution is calculated as a percentage of salary. This benefit will be funded by apportionments. The conference does not sponsor UMPIP for clergy appointed to churches in the conference. Each church may sponsor UMPIP individually. UMLife Death and disability plan for conference lay staff. Currently, the conference contributes the cost of premiums. During the calendar year 2015, the total cost for the UMLife program was $27,613. The anticipated increase in obligation for future years will be approximately 2% per year. The expected increase is based on actuarial tables. This benefit will be funded by apportionments. Relocation Expense Clergy members of the Annual Conference and full time local pastors who are appointed to charges within the Annual Conference or to conference staff positions, and lay professional employees of the Annual Conference, are entitled to receive reimbursement for moving expenses in accordance with conference rules. During the calendar year 2015, the total cost for the relocation benefit was $250,686. The Annual Conference is responsible for 70% of the moving expense reimbursement, and the church or employing entity is responsible for the remaining 30%. The portion the conference is responsible for is funded by apportionments. The portion the church or employing entity is responsible for is funded by direct billing. The anticipated increase in obligation for future years will be approximately 5% per year. This expected increase is due to increase in actual costs for moving and relocation.
PR-67
2016 CAL-PAC LEGISLATION
PR-68
