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The Board Bulletin — Fall 2014

After each regular meeting of the Board of Directors of The Board of Pensions of the Presbyterian Church (U.S.A.), the Board of Pensions publishes The Board Bulletin, providing a record of actions taken at the meeting. This Bulletin reports key information presented and actions taken at the fall 2014 meeting that affect plans and programs administered by the Board of Pensions.

Board of Pensions President Frank Spencer Addresses Directors

Frank Spencer addressed the Board of Directors in an education session on Friday morning with an optimistic view toward the future, echoing a message he delivered upon his election as President: “I encourage each of us to be optimists, keeping our eye not only on those who have served the Church and those who are serving the Church but on those who will serve the Church in the future.”

Mr. Spencer, who assumed office July 1, has modeled such optimism in seeing the potential for growth in the number of church workers served by the Board of Pensions, even as the Presbyterian Church (U.S.A.) experiences dramatic demographic shifts. He is challenging the Board to pursue ways to enable churches and other employing organizations to extend benefits to their employees not currently covered.

The agency’s main areas of focus will continue to be healthcare, death and disability, retirement pension, emergency financial assistance, and education, Mr. Spencer said. Going forward, however, efforts will be made to enhance offerings in those areas as the agency strives to help churches and other employing organizations “be the best they can be.”

Mr. Spencer raised several considerations that must be factored into the agency’s work in the months ahead:

  • Maintaining the Book of Order's mandate that the terms of call “shall include” participation in the Benefits Plan of the PC(USA), including pension and medical coverage;
  • Recognizing that the plan’s Traditional Program, which includes healthcare, pension, and death and disability coverage, was designed with features specific to those mandated into the plan; and
  • Acknowledging that as church and church-affiliated employing organizations employ more non­mandated and lay employees, the Traditional Program’s one-size model may fit fewer employers.

As the Board addresses these issues against the backdrop of the rising cost of healthcare coverage and the need to heed the risk and volatility of investment markets, it will enter into dialogue with those who serve the Church, seeking varied voices as it gathers input to develop a direction for the future.

The work ahead is about “the next 300 years,” Mr. Spencer said, recalling the agency’s roots in the 1717 founding of the Fund for Pious Uses, to support clergy. He indicated that the Board is committed to continuing such support as it works to serve the changing Church.

Enterprise Risk Assessment Presented

The Audit and Compliance Committee heard a presentation on the business risks the Board of Pensions is expected to face over the next two years. Rosemary A. Gallagher, Controller, reported the results of the 2014 Enterprise Risk Assessment, performed by Deloitte & Touche LLP and Board staff, and Peter E. Kalan, Chair of the Audit and Compliance Committee, summarized the findings for the full Board of Directors at its meeting October 25.

The purpose of an enterprise risk assessment is to understand, measure, and devise ways to control or limit exposure to operational, financial, regulatory, and strategic risks, as well as to maximize opportunities. The Board of Pensions conducts an enterprise risk assessment every two to three years and regularly reports to the Committee its progress in addressing those risks.

Since the Board’s last enterprise risk assessment in 2011, the “risk landscape” has shifted, with risks increasingly driven by external forces. The 2014 assessment identifies risks related to the sustainability of the current medical benefits business model, volatility of the investment markets, strategy to meet the needs of a changing denomination, and data and cybersecurity risks as the greatest risks to the Board’s long-term ability to fulfill its mission.

The risks cited in the 2014 Enterprise Risk Assessment were key considerations in developing the Board’s Two-Year Strategic Vision, described below.

Business Plan, Including Two-Year Strategic Vision, Approved

Development of a long-term strategy is critical for the Board of Pensions, President Frank Spencer told the Board of Directors during the meeting. Toward that goal, the agency’s annual business plan includes a two-year strategic vision document in addition to the 2015 initiatives designed to help achieve the vision.

The Directors — who approved the two-part business plan and the administrative and capital expense budgets needed to carry it out — discussed the documents with Board of Pensions staff during a dedicated session the day before. The documents were made available to them two weeks before the board meeting, providing the opportunity to prepare for the session.

The Board of Pensions 2015-16 Strategic Vision is designed to minimize risk and maximize potential in the following areas: Medical Plan Sustainability, Investment Market Risk, Corporate Stewardship, and Church Interface. Each area is considered a Key Driver and assigned action items in the Board of Pensions 2015 Initiatives: Key Drivers. Although distinct, the Key Drivers are designed to work together.

The Medical Plan will remain a primary focus as the Board works to keep it sustainable while also asking: Is the overall Benefits Plan providing what is needed or desired by employing organizations and plan members in a way that supports a changing church? Is the Board serving in a way that provides viable options and choices in both benefit design and cost?

To help answer such questions, and set a course for the future, during 2015 the Board will hold listening sessions with those it serves, including churches and other employing organizations, mid councils, and Benefits Plan members. Involving a variety of voices in planning is part of a broader initiative as the Board works to modify its service delivery model to be more responsive and consultative.

The Board will continue to diligently watch investment activity, as investments are the largest source of funding for the Pension Plan, Death and Disability Plan, and Assistance Program. Tracking tools will be enhanced to bolster that oversight.

Finally, the Board will continue relationship building. In recent years, that work has focused on collaborating with other agencies, to eliminate overlap among agency services and conserve resources. However, the vision for the next two years is rooted in the conviction that in challenging times, all must contribute to the dialogue. The Board, then, will seek opportunities to reach new audiences and to lift up voices less heard so that it may better serve as an agency of the Presbyterian Church (U.S.A.).

Balanced Investment Portfolio Returns 4.5 Percent for the Nine Months Ended September 30, 2014

Jacqueline D. Jenkins, Chair of the Investment Committee, provided an overview of the Committee's work on behalf of the members of the Benefits Plan and their beneficiaries.

The Committee affirmed the long-term strategic asset allocation ranges and the September 30, 2014, asset allocation of 36.5 percent in U.S. stocks, 21.0 percent in international stocks, 29.6 percent in fixed income, and 12.9 percent in other assets. The Committee reviewed the alternative investment component of the portfolio and approved commitments with existing managers for distressed real estate and energy.

At the previous board meeting, in July, the Investment team provided an overview of the historical impact of inflation on investment portfolios. At the October 2014 meeting, the Investment Committee heard a presentation on the use of commodities for inflation protection in a diversified investment portfolio and made a commitment to a commodities strategy.

Ms. Jenkins commented on the 2014 year-to-date performance of 4.5 percent within the framework of global economic and political events that resulted in volatile investment performance for many asset classes. The 4.5 percent return of the Balanced Investment Portfolio lagged the 4.9 percent return of the asset mix policy benchmark for the nine months ended September 30, 2014. The portfolio outperformed the policy benchmark for the five, 10, 15, and 20 years ended September 30, 2014. The policy benchmark assumes passive management of the portfolio using index funds.

Judith D. Freyer, Senior Vice President, Treasurer, and Chief Investment Officer, provided a review of the asset allocation of the Board of Pensions Balanced Investment Portfolio since the portfolio’s inception in 1987. She reviewed 2013-2014 investment decisions and outlined strategies for 2015.

The Balanced Investment Portfolio is the investment fund for the Pension Plan, Death and Disability Plan, Endowment Fund, and Assistance Program assets as well as restricted gifts made to the Board of Pensions. On September 30, 2014, the portfolio had a market value of $8.6 billion.

Rates for Medical Continuation, Medicare Supplement, and Dental Plans To Rise

The Directors approved increases in the monthly subscription rate for one healthcare program for 2015 and heard a report of the final increases implemented for two other plans. The increases, which take effect January 1, 2015, are intended to keep pace with the claims experience for the enrolled populations.

Medical Continuation

Former Traditional Program members enrolled in the Medical Continuation Program will see a monthly rate increase of approximately 7.5 percent, on average, for 2015. Subscription rates will go from $733 to $788 per month for members and from $1,466 to $1,576 per month for a member, covered partner, and/or children.

The increase does not apply to former Affiliated Benefits Program participants enrolled in Medical Continuation. The Directors, by past action, had already increased the monthly subscription charges of this group for 2015 by approximately 3 percent. This information was reported in the summer 2014 issue of The Board Bulletin.

Medicare Supplement

The subscription charges for retired members enrolled in the Medicare Supplement Plan will increase by $6 per person per month next year. The dues charged for coverage will be $224 per month for members and $448 per month for members and their Medicare-eligible covered partners. The Board was able to limit the increase to $6 per month largely because of the federal subsidies received through the Medicare Supplement Plan’s Prescription Drug Program, a qualified Medicare Part D plan.


Board staff reported the 2015 subscription rates for the optional dental coverage administered by Aetna and available to eligible active members of the Benefits Plan and their covered partners and children. The subscription rates for the PPO (preferred provider organization) plan will be approximately 6 percent higher next year; those for the DMO (dental maintenance organization) plan will not change for 2015.

During annual enrollment, now underway, members can go to the optional dental benefit rate checker on to find out which plan they are eligible for and next year’s rates.

Other Dues Information

For information on rate increases to the Affiliated Benefits Program, see the summer 2014 issue of The Board Bulletin. Information on the change in medical dues for the Traditional Program, effective January 1, has been disseminated throughout the Church and is available on (accessible from the Medical Dues box on the home page).

Call to Health Completion Rates Reported; Health Action Options Expanded for 2015

The Healthcare Committee heard a report of the results for the first year of the Board’s member health initiative, Call to Health, in which plan members could complete certain health actions to improve their health and lower their deductibles for 2015. Nearly 50 percent of members completed the program, having performed and reported the specified health actions by September 30, 2014, and more than 55 percent of members took advantage of the Medical Plan's preventive benefits during the 12-month period. In December, members will receive personalized postcards confirming their deductibles for 2015.

“This is a strong start for the first year of a major health initiative, and we hope to see growing participation next year,” said Patricia M. Haines, Senior Vice President of Benefits. “Our ultimate goal is to have all members embrace Call to Health — for their own health and financial well-being as well as the plan’s.”

Call to Health encourages members to use their preventive care benefits so that treatable conditions may be diagnosed early and at less expense to members and the plan. For the Medical Plan of the Presbyterian Church (U.S.A.), Call to Health is a way to help slow rising healthcare costs.

For Call to Health’s second year — October 1, 2014, through September 30, 2015 — members have greater choice in how they complete the program, which will lower their deductibles for 2016. The required health actions remain the same, but the “additional health actions” category, from which members choose any two actions to complete, is expanded.

There are no other changes to this health initiative for its second year. Information about the second year of Call to Health will be mailed to members in early January.

Death and Disability Benefit Limits Adjusted

The Board of Directors approved a recommendation by the Pension Committee to increase the following benefit limits, effective January 1, 2015. The action was taken to address inflation and ensure the plan continues to pay an adequate level of benefits.

Current Limit
New Limit
Salary Continuation (post-employment)
Maximum Lump Sum
Children’s Education
    Annual benefit
    Maximum aggregate benefit
Maximum Disability Benefits Basis

Roth Option To Be Added to RSP in 2015

The Board of Directors also approved amendments to the Retirement Savings Plan of the Presbyterian Church (U.S.A.) (RSP) to accommodate the addition of a Roth option, effective January 1, 2015.

The new contribution option allows participants to save after-tax dollars through the RSP. Participants will have the opportunity to withdraw eligible contributions and qualified Roth earnings on a tax-free basis.

Members, employers, and mid councils will receive communications about the Roth option in the coming months.

Assistance Committee Approves 2015 Spending Policy, Takes Other Actions

Each year, the Assistance Committee votes on a spending policy for the coming fiscal year, as required by the Total Return Investment Policy for the assistance funds. The Committee voted to continue its current policy in 2015, setting the maximum budget for the Assistance Program at 5 percent of the average of the year-end balances of the program’s core funds for the years 2010-2014.

The spending formula protects the Assistance Program from the volatility of the investment markets, ensuring a dependable and steady source of funding is available for its grant programs.

Supplement Guidelines

Based on the projected available income to support the Assistance Program of the Board of Pensions, the Assistance Committee renewed for 2015 the current income targets for the Income Supplement program and maximum income level guidelines for Housing Supplement eligibility:

Income Supplement Target Levels

  • $26,760 for retired single persons
  • $32,100 for retired members with covered partners

A target level is the maximum income a retired single person or member with a covered partner will have after an Income Supplement is added to all other sources of income. It is the most a member’s income will be after financial assistance from the Board is added.

Housing Supplement Maximum Income Levels

Retired plan members whose total retirement income falls below $39,450 a year may qualify for housing assistance if they meet certain eligibility guidelines.

Christmas Gifts

The Directors once again approved Christmas gifts from the Assistance Program of the Board of Pensions for the recipients of Income and Housing supplements, maintaining a tradition dating back many years. Single individuals will receive gifts of $250 and members with covered partners, $500. The gifts will be sent to all plan members receiving Income and/or Housing supplements as of November 1, 2014.

Income and Housing supplements help retired church workers and their surviving covered partners live modestly and independently. To qualify, their total income from all sources must fall below levels set by the Board.

Process for 2015 Prohibited Securities Lists Approved

The Social Responsibility and Church Relations Committee approved for 2015 the process for developing two prohibited securities lists, which the Board of Pensions annually updates and provides to the managers of the Balanced Investment Portfolio to prevent the purchase of prohibited securities. These lists identify U.S. and international companies in the tobacco, alcohol, and gaming industries — the traditional “sin stocks.”

The investment managers are also provided the General Assembly Divestment List each year. This list identifies the largest global tobacco companies, major producers of weapons for the military, and manufacturers of land mines and handguns. Based upon General Assembly actions in 2014, companies in the for-profit prison business and three companies whose activities have not contributed to the peace process in Israel and Palestine (Caterpillar, Hewlett-Packard, and Motorola Solutions) were added to the General Assembly Divestment List for 2015. Together, the Board of Pensions and GA lists reflect the prohibited securities and social witness policies of the denomination.

The Board of Pensions supports the Church’s policies by providing these lists to its investment managers and enforcing compliance, but it does not immediately divest or sell a newly prohibited security. The Board has a fiduciary duty to act in the best interest of Benefits Plan members as a whole and to ensure sufficient funds are available to keep the promises made to plan members, both current and future. For these reasons, when a security is added to the prohibited securities list, the Board of Pensions must first determine that failure to own the security will not harm the financial soundness of the plan. Accordingly, the managers that already own a newly prohibited security may retain it in the Balanced Investment Portfolio until they sell it in other actively managed accounts with similar mandates. (Exceptions to this process occasionally are granted by the Investment Committee of the Board of Directors, but only if the exception is deemed to be in the best interest of plan participants.) In this way, the Board upholds the Church’s social witness policies and its prohibition against owning certain securities while also fulfilling its duty to protect the financial well-being of the Benefits Plan.

The two Board of Pensions lists and the General Assembly Divestment List also are used to ensure the PC(USA) Socially Responsible U.S. Equity Fund and the PC(USA) Socially Responsible Balanced Fund do not invest in the prohibited securities. The funds are investment options in the Retirement Savings Plan of the Presbyterian Church (U.S.A.).

Questions or Comments?

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    The Board of Pensions of the Presbyterian Church (U.S.A.)
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    Philadelphia, PA 19103-3298
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