By Heather Hahn from the March-April 2012 issue of Interpreter Magazine
Active United Methodist clergy in the United States could see their retirement benefits change in the near future.
Two proposals heading to General Conference would change clergy pensions, shifting more of the risk in retirement preparation from annual conferences to individual clergy.
The General Board of Pension and Health Benefits is asking delegates to choose between two options if they vote to change the current retirement plan, called the Clergy Retirement Security Program. The proposed options are:
1) Combine a defined benefit component with a defined contribution component, like the clergy’s current retirement program but with a reduced benefit for clergy and, consequently, a lower contribution for conferences.
2) Change to a defined contribution-only plan.
A defined benefit plan provides a monthly pension payment for life, with the employer assuming the investment risk. A defined contribution plan â€” like the 401(k) plans most corporate employees now have â€” provides an account balance to use during retirement, with the clergyperson assuming the risk that the money will run out in his or her lifetime.
The agency’s board of directors recommends the first option, which combines a reduced defined benefit component with a defined contribution component. That plan would most likely deliver more dollars in retirement benefits for clergy for the dollars contributed than the second option.
“(The two options) result from competing priorities for the church: for the support of clergy and the financial considerations of conferences,” Barbara Boigegrain, the pension board’s general secretary, explained during the Pre-General Conference News Briefing in January in Tampa, Fla.
“The catalyst for the change became the conferences themselves. After the severe market downturn, we started getting lots of messages about significant concerns about making contributions.”
How will this affect clergy?
The proposed changes would not reduce benefits that are already being paid to retired clergy or reduce what active clergy have already earned.
The future impact of either option on active clergy would depend on a variety of factors, including years of service, level of compensation at retirement and the long-term performance of the stock market.
“The longer a clergyperson has already served and the closer he or she is to retirement, the less impact the change is going to have,” said Cindy Carlson, the pension board’s managing director of retirement services. “The more defined contribution benefit you have, the more variability there can be in benefit amounts.”
Either option would reduce the costs to annual conferences overall by about 15 percent compared to the current plan, said Dale Jones, managing director of education and plan sponsor relations.
Why the proposed changes?
The changes proposed by the pension agency’s board of directors are responding to feedback from some in the denomination who say change is necessary because of the financial pressures the denomination faces from declining U.S. membership and increasing local church expenses, such as building maintenance and debt. These financial pressures were exacerbated by the 2008 market downturn.
Local churches spent on average 2.63 percent of their funds supporting the denomination’s Clergy Retirement Security Program in 2008.
“As Christians, we have a theology of hope, but we try not to build that into our actuarial projections,” Boigegrain told those at the news briefing.
Jones said in a later interview that a reduced benefit would still compare favorably with retirement plans overall. The new recommended plan helps ensure that at least retirement benefits “should be sustainable and continue to provide adequate benefits for clergy.”
Heather Hahn , multimedia reporter, United Methodist News Service, Nashville, Tenn.