The assembly approved a number of measures to provide more funds for the church’s pension plan.
Effective July 1, the plan requires an estimated $325,000 per month over and above current contributions.
“It is no secret that the last three to five years have been interesting for the Pension and Benefits Board,” Rev. Peter Bush, a member of the board, told the assembly. “One of the challenges … was to determine if the plan is sustainable. That is, can the plan keep the promise into the future. And so we contracted with an actuarial firm to help us answer that question.”
Eckler, the plan’s actuaries, were tasked with determining whether or not the plan was sustainable over the next 15 years. They concluded that it should be sustainable for that period, although the results of the study are “highly dependent” on the assumptions used in the calculations, including the rate of investment returns, the board noted in its report.
On a solvency basis, though, there is still a funding shortfall.
“On a solvency basis, the government asks the question: if the company went broke tomorrow, is there enough money in the plan to pay the pensioners and to pay out all those who have accrued benefits in the past? Is there enough money in the plan to do that?” Bush said. “Now you can argue we’re a church, we’re not going to go broke tomorrow. If we go broke and decline it will take place over a long period of time. And we can have that conversation ad infinitum and the pension regulators will not care.”
The good news, he said, is that the solvency shortfall is smaller than the board anticipated. If churches, employees and employers continue to contribute at the level projected by the study, “it means that around 2018, 2019, somewhere in there, we will be in a position where the solvency hole is gone and we can take our foot off the pedal.”
The defined-benefit pension plan is funded primarily through contributions from both employers and employees of the church.
In the case of ministers and congregations, ministers contribute nine per cent of their qualifying incomes and congregations contribute five per cent of their dollar bases (or the congregation’s income in a given year, minus any funds used for mission purposes, debt repayments or raised for capital campaigns or major renovations).
Congregations that have been without a minister for four years are currently exempt from the requirement for congregations to contribute to the pension fund. But the assembly agreed to eliminate that exemption “in support of establishing the principle that all congregations throughout their entire life have an ongoing obligation to the pension fund with regard to their previous ministers.” The exemption will be eliminated effective January 1, 2015, although congregations that are currently exempted from paying into the pension plan will have until January 1, 2017.
Staff employed by other church bodies, such as the theological colleges and the Presbyterian Record, contribute nine per cent of their qualifying incomes and their employers contribute the same nine per cent.
The assembly agreed to increase those other employer contributions from nine per cent to 10.5 per cent effective January 1, 2015, and from 10.5 per cent to 12 per cent in 2016.
The Pension and Benefits board was also authorized by the assembly to “take immediate steps” to call attention to the need for additional funds for the pension plan, especially over the next five years.
Assembly Council, the body which carries out the work of the General Assembly when it is not in session, also took steps at its March meeting to designate funds for the pension plan. Until 2018, 25 per cent of the funds realized from the closure of congregations and 15 per cent of all undesignated bequests will be set aside to address the solvency shortfall.
“There will be short-term pain but overall I believe, speaking personally here, that we can take the pressure for a short time, and at the same time fulfil our calling to the mission and ministry of God in our time and place,” Bush said.
