The Board Bulletin Spring 2018

A call for developing Church leaders

The Reverend Dr. J. Herbert Nelson II, Stated Clerk of the General Assembly of the Presbyterian Church (U.S.A.), joined the Board of Directors in fellowship and its workings in committees. On Friday evening, he conducted a keynote, engaging with Directors and Board of Pensions staff on the state of leadership in the Church.

"We're at a significant place in the life of the Church," Rev. Nelson said. "We've been going through what I think is another reformation." In addressing the future of church leadership, he called for a return to "rigorous teaching" in the seminaries to prepare a pipeline of leaders. The "No. 1 work" of the Church is to strengthen leadership, Rev. Nelson said.

Rev. Nelson's words called to mind the earlier presentation to Directors by the Reverend Frank C. Spencer, President of the Board of Pensions. "We are called to raise up leaders to God's people," Rev. Spencer had said, introducing Benefit Plan innovations, including Pathways to Renewal. "J. Herbert and I share a deep faith that God is at work in this denomination," Rev. Spencer said as he introduced the Stated Clerk.

Experience apportionment granted

The Board of Directors approved a 3.9 percent experience apportionment for the Pension Plan, effective July 1, 2018, for a five-year cumulative increase of 18.4 percent. The apportionment, the sixth in as many years, complies with the Board of Pensions' experience apportionment policy guidelines. Those guidelines, which tie apportionments to the overall funded status of the plan, seek to balance short- and long-term goals: ensure the long-term financial stability of the plan, protect members against inflation, and maintain generational equity.

As of December 31, 2017, the Pension Plan was 131 percent funded.

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 currently received. Pensioners will be notified of the increase amount in their pension payments in July, the same month their payments 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, 2017, expressed as a percentage of the accumulated credits. Terminated vested members will be notified in mid-July of the increase in their pension credits. Active members will be able to see the increase in their pension credits on Benefits Connect beginning July 1.

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

2019 Benefits Plan to offer additional healthcare and income security options

As part of the ongoing commitment to offer PC(USA) employers flexibility and choice in providing benefits to more employees, the Directors approved the addition of the following options and features to the Benefits Plan, effective January 1, 2019: 

• High deductible health plan and health savings account — Responding to requests from PC(USA) employers and members for a qualified high deductible health plan (HDHP) aligned with the Church's vision and values, the Healthcare Committee approved adding an HDHP option to the Medical Plan. The HDHP will be offered with a corresponding health savings account (HSA), through which the employer can make nontaxable contributions and the member can set aside pretax income to pay current and future qualified healthcare expenses. A lower-cost medical option than the PPO or EPO, the HDHP will nevertheless include preventive care, Employee Assistance Program (EAP) access, and Call to Health — features that distinguish it from other high deductible health plans.
• Flexible spending accounts (FSAs) — The Board will work with a preferred administrator to offer a flexible spending account to employers. This will enable employers to offer their employees the opportunity to pay qualified healthcare and dependent care expenses with pretax dollars.
• Enhanced quality of care and preventive prescription features — Two key enhancements will be made to the Medical Plan's three medical options (PPO, EPO, and HDHP):
• Centers of Excellence: This feature will provide reduced copayments and travel reimbursement to a member or covered family member who undergoes a procedure at a facility designated as a preferred provider for that specific procedure based on quality measures and outcomes.
• Preventive prescription drug benefit: This provision eliminates deductibles and/or reduces copayments for certain preventive medications.
• Vision eyewear coverage — Employers will be able to offer this coverage to employees and may share none, some, or all of the cost with employees who enroll. The coverage will reimburse employees, up to set limits, for eyeglass or contact lenses on an annual basis.
• Group term life coverage — Employers will be able to provide this coverage, at levels they choose ($5,000, $10,000, $15,000, $20,000, $25,000, or $50,000), to active members in menu options who are not enrolled in death and disability coverage. The cost of coverage, if offered, will be fully paid by the employer.

Other plan changes effective January 1, 2019, include a decrease in the cost of supplemental death benefits coverage. This action creates an additional income security opportunity, which employers may offer their eligible employees.

In addition to these options and features, the Directors approved the creation of a high-cost claims fund for 2019 and 2020 intended to slow the rate of increase in the cost of Medical Plan coverage.

Watch for further information in Board Connections, the Board's monthly newsletter.

Balanced Investment Portfolio returns 17.0% in 2017

Judith D. Freyer, Executive Vice President and Chief Investment Officer, reviewed the Balanced Investment Portfolio 2017 investment performance of 17.0 percent within the framework of global economic and political events, which resulted in superior investment performance for many asset classes. She provided an overview of investment strategies for 2018. 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 for restricted gifts made to the Board of Pensions. On December 31, 2017, the portfolio had a market value of $9.6 billion.

The Reverend Dr. Lindley G. DeGarmo, Chair of the Investment Committee, provided an overview of the Investment Committee work on behalf of Benefits Plan members and their beneficiaries.

The Committee participated in a discussion of global investing in volatile markets and the challenges and opportunities for investors in 2018. The Committee reviewed the U.S. and international equity components of the portfolio and affirmed the December 31, 2017, asset allocation of 35.7 percent in U.S. stocks, 23.2 percent in international stocks, 27.4 percent in fixed income, and 13.7 percent in other assets. The Committee also affirmed the current long-term strategic asset allocation ranges for the Balanced Investment Portfolio.

The Committee reviewed the alternative investment component of the portfolio and approved a limited partnership commitment to an existing partnership relationship for debt and equity investments in middle market companies. 

The 2017 Investment Review is available on pensions.org.

'Pathways to Renewal' to support smaller churches and innovative ministries

Recognizing the need to nurture a new generation of ministerial leaders who will bring renewed vitality to congregations, the Directors approved a five-year pilot program, Pathways to Renewal, to enable more young ministers to receive full coverage in Pastor's Participation through the Benefits Plan. The program begins July 1, 2018.

Board staff proposed Pathways to Renewal in response to congregational trends revealed by the Board's detailed analyses in 2017 of congregational budgets, clergy compensation, ordination trends, and benefits distribution over the last 10 years.

The program is designed for

• small congregations, with 150 or fewer members, where there has not been an installed pastor and no election of a Pastor Nominating Committee for at least two years*; or
• any congregation with an installed pastor that expands its ministerial staff.

In either case, the newly employed minister must be under 40. The program reduces the cost to congregations of Pastor's Participation, in the Benefits Plan. Pathways to Renewal is designed to encourage congregations to call more ministers and to alleviate barriers to entering and remaining in ministry.

By nurturing financial stewardship in PC(USA) ministers and making full benefits more affordable for small churches, the Board believes the denomination can be transformed for generations to come. Small churches may understand a significant component of their mission to be providing a context for young ministers to develop their skills and deepen their call in ministry while larger churches may understand a part of their mission as supporting young ministers in new and innovative ministries.

*This digital edition of the Board Bulletin includes updates to program criteria after the newsletter's initial release.

Minister Educational Debt Assistance Program expanded

The Minister Educational Debt Assistance program was created to reduce financial pressures on new ministers. Responding to changing needs of the Church and to support the objectives of Pathways to Renewal, the Directors approved the following changes to the eligibility guidelines for Minister Educational Debt Assistance Grants, effective July 1, 2018:

The minister must

• be enrolled in Pastor's Participation;
• participate in CREDO or Healthy Pastors, Healthy Congregations; and
• meet criteria established by the Board to ensure the need-based nature of the program.

The Directors voted to increase the maximum of the Minister Educational Debt Assistance Grant program. The minister may receive grants of up to $5,000 per year for up to five years, provided the minister participates in designated financial coaching and shares in reducing or eliminating his or her educational debt. Together, the changes in eligibility and grant size represent a significant expansion of the program — reflecting the Board's commitment to ministers' financial wholeness.

Disability benefits to increase

The Directors granted a disability benefit increase of 2.0 percent for members receiving disability benefits as of December 31, 2017. The increase, effective July 1, 2018, is intended to prevent the erosion of disability benefits through inflation.

The assets and liabilities of the Death and Disability Plan are evaluated independently of the other plans administered by the Board of Pensions. At the March meeting, the Directors reviewed investment and actuarial experience, reserves, and inflation and determined that the benefit increase is both necessary and appropriate.

Disability benefit increases are not guaranteed to be granted each year.

Directors elect leadership for upcoming year

The Board of Directors took action to elect, from among current Directors, the following individuals to serve as Board officers for one-year terms beginning at the conclusion of the 223rd General Assembly (2018):

                                Fairfax F. Fair                         Chair

                                Fredric J. Bold Jr.                  First Vice Chair

                                Suzanne P. Welsh                  Second Vice Chair        

John W. Hamm will continue to serve as Board of Directors Chair through the conclusion of General Assembly.

The next meeting of the Board of Directors will be in Philadelphia July 12-14, 2018. Please contact the Corporate Secretary for further information at csecretary@pensions.org or 215-587-7600.