General Conference Changes to Pension
There has been a maelstrom of rumors swirling around the EPA Conference with regard to the choices enacted by vote of General Conference in May. While there are a multitude of small and mainly administrative changes, those listed below are the larger changes which seem to be causing confusion. Further information will be available following the jurisdictional meetings for pension officers later this fall.
The benefit plans administered by the General Board on behalf of those who serve The United Methodist Church are directed by General Conference and aligned with their vision: “To enable our participants to be secure in life’s transitions.” As set forth in The Book of Discipline, the General Board is an independent agency which receives no general Church funds. The United Methodist Church is a Connectional System. We, as a conference, cannot make changes to the plan design or payout method, or withdraw from the plan itself.
Clergy Retirement Security Program (CRSP) –
- Requires that if an annual conference does not pay the full amount required for its defined benefit funding, the contributions that it does pay will be allocated first to the Pre-82 Plan if a contribution is due, then to the assets funding the Ministerial Pension Plan (MPP) annuities if a contribution is due, and last to the defined benefit portion of CRSP. (Our conference is not underfunded for either the MPP or the CRSP plans at this time.) This change protects conferences in the event that one conference fails to make a payment. Failure to pay our pension billing in full will affect current appointed clergy. This action took place on May 4, 2012.
- Effective January 1, 2014 only Full-time clergy are eligible to earn pension as a mandatory benefit. Annual conferences may also elect to cover clergy who are appointed three-quarters time or half-time. Clergy who are appointed one-quarter time will no longer be eligible to earn CRSP benefits; however, conferences may elect to provide benefits through UMPIP. This will require a vote by annual conference. The General Board will by supplying us with figures to determine the ramifications of covering or not covering those clergy who are appointed three-quarters time or half-time.
- Under the current CRSP, the formula for determining the defined benefit (DB) component is 1.25% of the Denominational Average Compensation (DAC) at retirement multiplied by years of service since January 1, 2007. The multiplier has been reduced to 1% for years of service beginning January 1, 2014. The current CRSP benefit formula will remain effective for all covered service prior to January 1, 2014.
- The defined contribution (DC) component of CRSP will also change. Beginning January 1, 2014, the Church will contribute 2% of compensation. In addition, the Church will match participant contributions to the United Methodist Personal Investment Plan (UMPIP)—up to 1% of compensation—and deposit those matching funds into participant CRSP DC accounts. Therefore, if a participant contributes at least 1% of compensation to UMPIP, his or her CRSP DC contributions will be 3%, as currently under CRSP.
- Currently, married retirees receive benefits of greater value than unmarried retirees because the Church subsidizes benefit continuation to clergy surviving spouses. Beginning January 1, 2014, the initial dollar amount of the benefit paid to a married participant will be reduced to offset the value of spousal benefits. Please note: This change only applies for benefits based on service on or after January 1, 2014. Benefits earned under CRSP prior to January 1, 2014 are not affected.
- Currently, benefits cease upon the death of the participant and spouse. Beginning January 1, 2014, participants may designate a disabled adult child as a secondary contingent annuitant. After the participant and his or her spouse die, the disabled adult child would continue to receive DB benefits for life. The initial participant benefit would be reduced to pay for this extra benefit.
Ministerial Pension Plan (MPP) MPP is the predecessor plan to CRSP –
- Plan sponsors are explicitly required to make additional contributions if MPP annuity funding is insufficient (e.g., due to investment losses). The EPA Conference is currently fully funded for MPP.
- Currently, MPP requires participants to convert at least 65% (anywhere from 65% to 100%) of their MPP account balance into a monthly benefit payment (annuity) at or after retirement. Many participants elect to convert the entire 100%, although some have elected to rollover 35% into their UMPIP so that more of their money is available to leave to their beneficiaries. Participants who set up their MPP benefits on or after January 1, 2014, must convert exactly 65% of their account balance to an annuity. The remaining 35% can be rolled over to the United Methodist Personal Investment Plan (UMPIP), an IRA or another qualified employer retirement plan, or paid in cash in one lump sum. This change will not impact participants who annuitize prior to January 1, 2014.
This does certainly mean that your annuitized pension is less, but the other 35% can be converted to “cash installments” thereby increasing the monthly pension amount. However, when the 35% cash is gone, so are the cash installments, (unlike the 100% in the current plan that never runs out.) The clergyperson will continue to receive the lifetime monthly pension based on 65%. That means clergy will need to be more diligent in making sure that the remaining 35% lasts for their lifetime(s). As in both the current and new plans, there are many options for the 35% such as moving monies outside the GBOPHB or leaving it with the GBOP to invest, using it as savings, or estate for heirs or down payment for home, etc.
The new plan design should have relatively little impact on participants nearing retirement since they will have fewer years under the revised plan.
The Conference Board will strive to keep you up to date on these changes as more information becomes available.