Strong stewardship and a long-term investment strategy enabled the Board of Directors to grant an experience apportionment for the Pension Plan for the seventh consecutive year, despite tumultuous 2018 markets.
Directors also approved new grants intended to bring more ministers into Pastor’s Participation, which is designed to meet the needs of ministers and families, and to provide financial assistance for retirees for dental services and hearing aids.
Directors received a report from Michael F. Fallon Jr., Executive Vice President and Chief Financial Officer, on the finances of the Board of Pensions and the funding of its plans and programs. Investment assets available for benefits and programs total $9.8 billion for all plans as of the end of 2018, with each plan above the minimum funding adequacy levels.
These actions and more from the spring 2019 meeting are covered here.
The Board of Directors approved a 3.6 percent experience apportionment for the Pension Plan, recognizing the continuing long-term performance of the Board of Pensions Balanced Investment Portfolio. For the 10 years ended December 31, 2018, the portfolio returned 9.3 percent, even in the face of a one-year decline of 3.9 percent.
The apportionment is effective July 1, 2019. The seventh in as many years, it results in a seven-year cumulative increase of 23.9 percent.
The granting of the apportionment complies with the Board of Pensions experience apportionment policy guidelines. Those guidelines, which tie apportionments to the overall funded status of the plan, establish three goals: ensure long-term financial stability of the plan, protect members against inflation, and maintain generational equity.
An experience apportionment increases pension benefits or credits:
The Board of Directors approved a new grant to support minister well-being and presbytery efforts to establish new congregations and spread the good news. The result: More ministers who are not receiving comprehensive benefits may now be able to.
Grants will be available to presbyteries to help finance Pastor’s Participation dues for organizing pastors and evangelists (church job Code 301) who work at least 20 hours a week. The one-year grants will be renewable for up to five years. Dues will be fully covered for the first three years, with two-thirds coverage in the fourth year, and one-third in the fifth.
Additional details will be available in May when the application period opens.
The Board of Directors approved establishment of Retiree Medical Grants, to be available through the Assistance Program. Retirees, spouses, and surviving spouses may each receive, once every three years, a need-based grant of up to $2,500 to help them pay for dental services and/or hearing aids.
The Board of Pensions has listened to retirees express a need for such support and is happy to be able to provide it. The addition of this grant reflects the Board of Pensions’ drive to support the well-being of ministers, employees, and their families throughout their lives.
The new grant will take effect July 1. Eligibility details and applications will be available in May.
The performance of the Board of Pensions Balanced Investment Portfolio showed absolute and relative strength at year-end 2018. The 20-year annualized return of 6.5 percent exceeded the policy benchmark by 0.90 percent while the 10-year return of 9.3 percent beat the benchmark by 0.40 percent. The one-year return of negative 3.9 percent exceeded the benchmark of negative 4.9 percent by a full 1.0 percent.
The Board of Pensions 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, 2018, the portfolio had a market value of $9 billion.
Judith D. Freyer, Executive Vice President, Treasurer, and Chief Investment Officer, reviewed the 2018 performance of the portfolio within a framework of global economic and political events. Those events contributed to a year of volatile investment performance for most asset classes. Ms. Freyer provided an overview of investment strategies for 2019.
Suzanne P. Welsh, Chair of the Investment Committee, provided an overview of the work of the Committee on behalf of the members of the Benefits Plan and their beneficiaries.
The Committee reviewed the U.S. and international equity components of the Balanced Investment Portfolio and approved the addition of an emerging markets equity manager. The Committee affirmed the December 31, 2018, asset allocation of 32.4 percent in U.S. stocks, 20.2 percent in international stocks, 31.4 percent in fixed income, and 16 percent in other assets. The Committee affirmed current long-term strategic asset allocation ranges for the Balanced Investment Portfolio.
The Committee reviewed the asset allocation and investment performance of the investment options in the 403(b)(9) Retirement Savings Plan of the Presbyterian Church (U.S.A.) and the 401(k) New Covenant Retirement Savings Plan. The Committee approved two changes in fund options. Effective July 1, 2019, the Fidelity Global ex U.S. Index Fund will be added as an international equity fund option. Also effective July 1, 2019, the Royce Opportunity Fund will no longer be a U.S. equity fund option. Details for Retirement Savings Plan participants affected by these changes will be available in May.
The 2018 Investment Review is available on pensions.org.
Certain death and disability benefits are subject to fixed benefits limits. They are increased periodically to adjust for payroll changes, inflation, and benefits adequacy. Effective January 1, 2020, action by the Board of Directors will result in increases to the minimum amount payable under the salary continuation benefit (from $9,000 to $10,000), and to the maximum lump-sum death benefit basis and the maximum disability benefits basis (from $100,000 to $110,000).
The Board of Directors granted a 2 percent increase for members receiving disability benefits as of December 31, 2018. The increase, effective July 1, 2019, 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 appropriate.
The Board of Directors re-elected the following officers for one-year terms beginning at the conclusion of the Directors’ 2019 Annual Meeting, June 20-22:
The next meeting of the Board of Directors will be in Minneapolis June 20-22, 2019. For further information, email the Corporate Secretary or call 215-587-7600.