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Market bumps raise church pension concerns
G. Jeffrey MacDonald, Religion News Service
January 04, 2011
5 MIN READ TIME

Market bumps raise church pension concerns

Market bumps raise church pension concerns
G. Jeffrey MacDonald, Religion News Service
January 04, 2011

Religious denominations have long provided retired clergy

and staff with secure pension payments — more secure, in some cases, than

corporate retirement plans.

But some recent bumps have drawn attention to the

vulnerabilities of so-called “church plans,” which are exempt from federal

regulations aimed at safeguarding retirement funds for private-sector retirees.

As cash-strapped states and private companies revamp, freeze

or end their pension programs altogether, participants in church plans are now

realizing how church plans can be riskier than they appear, observers say.

“As a group, employees in so-called church plans are far

more at risk than other private sector employees,” said Karen Ferguson,

director of the Pension Rights Center, a Washington-based watchdog group.

Bucking the trend is GuideStone Financial Services. Since

1918 when it started, the organization has never missed a payment, said Johnny

Ross, who works with GuideStone and the Baptist State Convention of North

Carolina.

Ross spoke with a reporter from the Biblical Recorder.

“Fear and greed drive the market,” said Ross, who considers

GuideStone offers “the best retirement plan today.”

GuideStone did alter its rate on lifetime annuities. Beginning Jan. 1,

2011, GuideStone will feather down its rate from 6 percent down to match the market rate.

Unlike other private sector workers whose pensions are

insured by the federal Pension Benefit Guaranty Corporation, church employees

have no federal agency poised to rescue their employer-provided pensions in the

event of a devastating market crash.

Yet “because there hasn’t been a collapse of a (church)

pension board plan, everybody I think is comfortable leaving them alone.” In

several recent cases, however, churches have failed to keep their plans fully

funded to be able to meet obligations to retirees:

  • In October, the Roman Catholic Diocese of Wilmington

    (Del.) said it had just $8.5 million available to pay $52 million in pension

    liabilities. The diocese, which is under Chapter 11 bankruptcy protection

    because of the clergy sexual abuse scandal, is assuring pensioners it will meet

    its obligations.

  • In August, the Archdiocese of Boston informed employees their

    pension plan — funded at just 79 percent — is “unsustainable.” The archdiocese

    will keep paying its obligations, according to spokesman Terrence Donilon, but

    a new market-based plan involving 401(k) or 403b accounts will take effect Jan.

    1, 2012, funded through individual and employer contributions.

  • About 12,000 Lutherans are seeing their pension payments

    shrink by 6 to 9 percent annually from 2010 through 2012. The defined benefit

    program of the Evangelical Lutheran Church in America was only 61 percent

    funded in February 2009, and has been closed to new participants since Jan. 1.

Other major denominations are reporting no such problems

with their defined benefit plans. Several mainline denominations still offer

defined benefit programs, which are increasingly rare in the private sector, as

they promise to pay retirees a fixed monthly sum based on a formula.

Defined benefit plans of the Episcopal Church ($8.5

billion), the Presbyterian Church (USA) ($6.2 billion) and the United Methodist

Church ($6.2 billion) are all sufficiently funded to meet future obligations,

according to church spokespeople. Those three denominational pension funds rank

among the nation’s largest, each of them more than twice the size of Vermont’s

$2.9 billion state pension fund, for example.

Unconvinced that they should follow the lead of corporate

America and offer more plans like a 401(k), the organizations overseeing these

assets remain committed to offering defined benefits.

“We maintain a prudent, long-term, disciplined and measured

investment strategy, and remain convinced that this approach is the most

prudent for achieving positive long-term investment results,” said Colette

Nies, spokeswoman for the United Methodist Church’s General Board of Pension

and Health Benefits, in an e-mail.

Observers cautioned church pensioners not to get lulled into

a false sense of security.

“The church world tended to be a place that wanted, in the

case of clergy, to protect those people from ordination to grave,” said David

Powell, a Washington attorney and church pension expert who’s written the only

book on the subject. “They wanted to make those sorts of pension promises. It’s

the affordability of them that has got many of them concerned now.”

Church plans could qualify for federal insurance if they were to

voluntarily comply with associated federal regulations, according to PRC

spokeswoman Nancy Hwa. But few, if any, have taken that step.

(EDITOR’S NOTE — Dianna L. Cagle, BR assistant managing editor, contributed to this RNS story.)

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