During Monday’s sederunts, the General Assembly struggled to endorse a strategy to overcome deficits in the church’s pension plan.
As of June 30, the plan was facing a $34-million solvency shortfall and a $10-million going concern shortfall. Both of these are common measures used by actuaries to test the short-term and long-term health of a pension plan. And both shortfalls must be filled through special payments.
Of the two shortfalls, the pension board said the solvency (or short-term) deficit was “the real threat to the plan” as it would require extra payments of $257,000 each month for a decade to fill the gap.
The pension board recommended that “the Assembly Council, in consultation with the Pension and Benefits Board, be granted power to issue to approve the possible move from a single-employer plan to another type of plan, pending regulatory approval” or, if the Ontario government refused to approve the shift, to “make whatever plan changes within the existing plan that are necessary” to address both shortfalls.
The shift to a multi-employer plan was intended to exempt the plan from solvency funding requirements, and therefore from the requirement that it make up its solvency funding shortfall.
Among other changes, such a shift would require a clause in the pension plan document that “gives the governing body the ability to reduce benefits retroactively when no other options are available for reducing funding shortfalls (this is not allowed under a single employer plan, where only future benefits can be reduced),” the report noted.
The board also said “we anticipate needing to increase the employee’s contribution from seven per cent to nine per cent, the congregational assessment from 3.1 per cent to five per cent and the other employer contributions from seven per cent to nine per cent.”
An amendment proposed by Rev. Peter Bush, a commissioner from the Presbytery of Winnipeg, outlined a six-step strategy he believed could “top up” both shortfalls by 2022:
- All active members of the plan over the age of 50 increase their contributions to 11.5% of qualifying income (up from 7% presently) effective Jan 1, 2013.
- All active members of the plan under the age of 50 years of age contribute 9.5% of qualifying income (up from 7% presently) effective Jan. 1, 2013.
- That the congregational rate rise to 4.6% of dollar base effective Jan. 1, 2013.
- That the employer rate be 10.5% of qualifying income.
- That the formula of 1.5 times years of service not be changed for any active member of the plan.
- That the max qualifying income in 2013, 2014 and 2015 be increased by the Statistics Canada reported CPI from June until May less 2%
It concluded: “Further that the Presbyterian Church in Canada affirms its commitment to not roll back the pensions of any present pensioners, regarding the church to be in a covenanted relationship with its pensioners.
“The Assembly Council, in consultation with the Pension and Benefits Board, be granted power to issue to make whatever further plan changes are necessary to address both the going concern and solvency shortfalls as guided by the principles laid out above.”
Bush said as a minister over 50, it “makes me angry” when he speaks to younger ministers and hears them suggest that, although they contribute to the pension plan, they do not count on it to be there by the time they retire. As a minister who will soon be drawing on the plan in his retirement, he said he felt it was right for him to contribute more to the plan than younger ministers. And he urged the assembly to “own” their decision regarding the plan, rather than shifting responsibility and accountability to the Pension and Benefits Board and Assembly Council.
Rev. Doug Cameron, a commissioner from the Presbytery of Essex-Kent, said he hoped the assembly would send a message that it acknowledges drastic action must be taken and it’s willing to accept accountability for the decisions the pension board and council will eventually make.
In the end, the assembly decided to refer Bush’s amendment, as well as the original recommendation from the Pension and Benefits Board, “to Assembly Council and the Pension and Benefits Board with power to issue.”
Congregations contribute a portion of their annual revenue—calculated through a formula to determine their “dollar base”—to the pension plan. Ministers, eligible employees and other church employers also contribute to the plan.
According to the June valuation, the average age of the 687 active plan members is 51.5 years. There are 248 deferred vested members of the plan (former employees over 55 who no longer work for the church or contribute to the plan but are not yet drawing pensions) with an average age of 54.8. And there are 883 retired members drawing pensions from the plan.
Two additional motions related to the pension board were passed Tuesday afternoon:
As there were no ministers serving on the Pension and Benefits Board, the General Assembly agreed to appoint two ministers to the board for two-year terms.
And the court agreed to “instruct the Trustee Board to reexamine the investment policy statement and asset allocation to determine how it can be changed to meet the targeted return.”
