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The Board Bulletin — Spring 2015

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 spring 2015 meeting that affect plans and programs administered by the Board of Pensions.

Experience Apportionment Granted

The Board of Directors approved a 4.7 percent experience apportionment for the Pension Plan, effective July 1, 2015. The apportionment, the third in three years, complies with the Board of Pensions experience apportionment policy guidelines. Those guidelines, which are tied to the overall funded status of the plan, balance the desire for annual increases with generational equity and long-term financial stability. The plan was 130.5 percent funded as of December 31, 2014 (before the action was taken).

An experience apportionment is a lifelong increase in pension benefits or credits, depending on employment status:

  • For retirees and eligible survivors, an experience apportionment is an increase in the individual’s current pension benefit for as long as the person lives, expressed as a percentage of benefits received. Pensioners will be notified of the amount of the increase to their pension checks in late June; their July pension checks will reflect the increase.
  • For active and terminated vested members, an experience apportionment is an increase in the individual’s pension credits accrued as of December 31, 2014, expressed as a percentage of the accumulated credits. Active members will be able to see the pension credits from the apportionment in a separate line item on their online Statement of Benefits (on Benefits Connect) in early July. Terminated vested members will be notified of the increase in their pension credits in mid-July.

The Directors annually review plan reserves and other data. Experience apportionments are not guaranteed to be granted each year.

Healthcare Recommendations To Maintain Stability

The Healthcare Committee, in its meeting Friday, expressed the desire to provide dues stability for employers and members next year. The Committee recommended to the full Board that, for 2016, the Board of Pensions maintain both its current dues and the current dues minimum and maximum for Traditional Program medical coverage. Current dues are 23 percent for Member-only coverage and 24.5 percent for Member + Family coverage (subject to the medical participation minimum and maximum).*

In a presentation to the Directors by Board of Pensions President Frank C. Spencer and in discussions by the Healthcare Committee, “stability” was a common thread. The Benefits Plan of the Presbyterian Church (U.S.A.) continues to be financially stable; however the Medical Plan continues to be volatile. At the same time the Church faces financial and other challenges.

The Board believes that addressing these challenges effectively requires the whole Church to work together. To that end, the Board is engaging the church community in conversations about “church benefits, the values that infuse the Benefits Plan, and how best to respond to the economic realities our churches face today,” Mr. Spencer said.

“As we do this,” Mr. Spencer added, “we look to provide employing organizations with options for those church workers who are enrolled in the plan but whose participation is not mandated, so that employers can continue to offer benefits and possibly include the majority of other church workers who are currently not covered by the plan.”

To help address this, the Committee recommended that, for the approximately 20 percent of employing organizations that provide Traditional Program coverage to employees whose participation is not mandated, the Board offer an alternate method of calculating 2016 Traditional Program medical dues for these employers. Employers would be able to choose the method — traditional or alternate — that best meets their needs. Dues for the alternate method would be based on tiered coverage, and employees whose participation in the plan is not mandated would be able to choose the tier appropriate for their individual circumstances. Details and associated costs will be provided as part of the final recommendation by the Healthcare Committee at the summer Board Meeting, in June, when the full Board of Directors will vote on the recommendations.

Efforts will continue after this Board Meeting and the June vote to determine how best to balance the needs of the Church and the need for Medical Plan stability. The Board is seeing growing evidence that the one-size fits all model of the Benefits Plan Traditional Program is less effective and affordable than it once was. Church demographics, congregational hiring patterns, the emergence of alternate worshipping communities, and escalating healthcare costs are resulting in fewer church workers being covered each year. The Board estimates that fewer than 10 percent of all PC(USA) church workers are covered by the Benefits Plan.

In his remarks, Mr. Spencer underscored the Board of Pensions’ commitment to engaging the entire Church in the conversation. Finding “the best balance” depends on the Board being inclusive in its approach — listening to many voices throughout the Church — and having dialogue around employers’ and employees’ needs. “I’m confident the answers will arise out of the conversations we’re having across the Church, so we will keep working to meet this challenge together, as a community,” Mr. Spencer said.

* Under the recommendation, Traditional medical dues would not increase in 2016 and employers could continue, at their discretion and subject to presbytery policy, to require members with family coverage to share some or all of the allowable dues share (the 1.5 percent portion of the 24.5 percent dues for Member + Family coverage).

Dues Allocation Changed To Cover Disabled Members’ Medical Expenses

The Directors approved a policy to increase Medical Plan funding from the Death and Disability Plan. For 2015, the increase will equal the difference between the total annual medical dues and total annual medical expense for disabled plan members and their families.

The change addresses a growing imbalance between the medical dues and expenses for these members and families. The total difference, about $7 million in 2015, is currently covered through dues for active member coverage. The new allocation policy removes this burden from employers’ shoulders and instead appropriately draws on the disability plan’s reserves.

The new policy maintains the financial integrity of the disability plan by limiting the exposure of its reserves. The policy sets the maximum funding support at 4 percent of Death and Disability Plan reserves.

Towers Watson, actuarial consultant for the Pension Plan, predicts the new dues allocation will simply slow the rate of reserve growth over time. As of December 31, 2014, the reserves totaled $443 million.

Disability Benefits To Increase

The Directors granted a disability benefit increase of 1 percent for members receiving disability benefits on December 31, 2014. The increase, effective July 1, 2015, is intended to help offset increases in the cost of living.

The assets and liabilities of the Death and Disability Plan are evaluated independently of the other plans administered by the Board of Pensions. In considering the decision, the Directors reviewed investment and actuarial experience, reserves, and cost-of-living and average salary changes. They determined that the benefit increase is both necessary to members and appropriate, owing to the plan’s strong reserve levels as of December 31, 2014.

The Directors annually review plan reserves and economic data. Disability benefit increases are not guaranteed to be granted each year.

Income Supplement Target Increase Approved

Based on updated financial projections for the Assistance Program, the Assistance Committee increased the current income targets for the Income Supplement program,* effective April 1, 2015:

  • $27,420 for retired single persons
  • $32,880 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.

As reported in the fall 2014 issue of The Board Bulletin, the Assistance Committee voted at its October 2014 meeting to maintain the 2014 targets for 2015, based on the available financial information. Strong year-end results for the Assistance Fund allowed the Committee to adjust the targets for the remainder of 2015.

*The Income Supplement program supplements the monthly income of retired church workers and their surviving covered partners whose total income from all sources is below the levels indicated and who have 20 or more years of service to the Presbyterian Church (U.S.A.); see the Assistance section of for additional criteria.

Balanced Investment Portfolio Returns 5.6% in 2014

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

The Committee affirmed the December 31, 2014, asset allocation of 37.9 percent in U.S. stocks, 19.9 percent in international stocks, 29.4 percent in fixed income, and 12.8 percent in other assets. The Committee heard a presentation on investing in private equity and reviewed currency hedging strategies in light of a strong U.S. dollar.

The Committee affirmed current long-term strategic asset allocation ranges and the 7.0 percent actuarial interest return assumption for the Balanced Investment Portfolio.

Judith D. Freyer, Chief Investment Officer, reviewed 2014 performance and 2015 global opportunities within the context of a year of volatile investment performance for many asset classes.

Although the 2014 Balanced Investment Portfolio return of 5.6 percent lagged the 2014 Asset Mix Policy Benchmark of 7.4 percent, it exceeded the return of the Asset Mix Policy Benchmark for the 20-year period ended December 31, 2014. The Policy Benchmark assumes passive management of the Portfolio using index funds. Ms. Freyer noted that since 1990, despite global economic decline, the use of active management strategies in the Balanced Investment Portfolio provided an additional $840 million in assets. 

The Balanced Portfolio is the investment fund for the Pension Plan, Death and Disability Plan, Endowment Fund, and Assistance Program, as well as for restricted gifts made to the Board of Pensions. On December 31, 2014, the Portfolio had a market value of $8.6 billion.

The 2014 Investment Review, We Are Believers: Pascal, Occam and Kant. A Wager, a Razor and the Golden Rule, is available on

Directors Elect Leadership for Upcoming Year

The following Directors were elected to continue serving in their Board leadership roles for another year:

John W. Hamm                         Chair 
Rev. Dr. Lindley G. DeGarmo   First Vice Chair 
Judith A. Harris                        Second Vice Chair 

According to the bylaws, officers are elected annually. Directors may serve up to two consecutive four-year terms on the Board of Directors.

The Board of Directors governs the Board of Pensions, which administers pension, healthcare, death, and disability benefits and financial assistance for qualifying members who serve or have served the Presbyterian Church (U.S.A.).

Board Responds to Qualified Domestic Partner Relief of Conscience Request

The Directors approved a response to the 219th General Assembly (2010) resolution urging that the Board of Pensions provide relief of conscience for congregations for whom the provision of benefits under the Benefits Plan for same-gender domestic partners and their dependent children causes a moral dilemma.

The Board’s response, which will be presented to the 222nd General Assembly (2016), will be available on (in About the Board of Pensions) beginning in mid-March. A letter describing the response will also be sent to churches and other employers that initially registered objections to this coverage in the summer of 2012.

Questions or Comments?

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