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. This Bulletin reports key information presented and actions taken at the summer 2017 meeting that affect plans and programs administered by the Board of Pensions.
In accordance with the bylaws of the Board of Pensions, the Board of Directors’ second meeting of the year is to be the annual meeting, at which the audited financial statements are distributed. The June 24, 2017, meeting of the Board of Directors was the annual meeting, during which the 2016 audited financial statements were distributed to the full Board of Directors.
After several years without a medical dues increase for family coverage, the medical dues rate for Pastor’s Participation in 2018 will rise, from 24.5 percent to 25 percent of effective salary. The increase is due largely to the trend of increasing medical and prescription drug costs for the covered population.
The minimum and maximum medical dues bases for Pastor’s Participation in 2018 will remain at 2017 levels: $44,000 and $124,000, respectively. These amounts represent the minimum and maximum salaries on which employers are billed for medical coverage.
The 2018 coverage costs for menu options will be available through Benefits Connect in mid-July. At that time, employers can begin reviewing and submitting Employer Agreements for 2018, selecting the benefits they will make available to their employees during annual enrollment. The medical coverage costs for menu options are unique to each employer and based on demographics, employee coverage choices, and regional healthcare costs.
Board staff and the Medical Plan’s actuary, Milliman Inc., presented a summary of historical actuarial forecasts for the Medicare Supplement Plan and an analysis of the plan’s recent medical and prescription drug experience to the Healthcare Committee. Citing limited 2017 claims experience and trend volatility, staff requested authorization to set the 2018 Medicare Supplement coverage costs in the fall, when the most up-to-date information will be available.
The Committee, and in turn the full Board of Directors, approved staff’s recommendation that any dues increase for Medicare Supplement coverage in 2018 not exceed $12 per participant per month.
Death and Disability dues for those not participating in the Pension Plan will be 2.5 percent of effective salary, effective January 1, 2018. For those participating in the Pension and Death and Disability plans, dues for death and disability coverage will remain at 1 percent of effective salary.
The Reverend Dr. Lindley G. DeGarmo, Chair of the Investment Committee, provided an overview of the Investment Committee’s work on behalf of Benefits Plan members and their beneficiaries.
The Investment Committee reviewed the 2017 Liquidity Study and affirmed the role of periodic studies focusing on the liquidity of the Board of Pensions Balanced Investment Portfolio under diverse scenarios. With annual pension, death, and disability benefits payments more than five times the dues received for these benefits, adequate liquidity of the portfolio is essential. At the most basic level, the purpose of the 2017 Liquidity Study was to evaluate the portfolio’s capacity for paying those benefits on a monthly basis.
The Committee reviewed the alternative investment component of the portfolio, which includes private partnership investments in private equity, distressed debt and venture capital, and marketable diversifying strategies that include real estate securities and commodities.
The Committee had educational forums on investing in distressed debt and on real estate market conditions and current real estate investment strategies. The Committee approved a commitment to a distressed debt private partnership.
The Committee affirmed the long-term strategic asset allocation ranges previously approved by the Board of Directors and confirmed that the May 31, 2017, asset allocations of 36.2 percent in U.S. stocks, 21.2 percent in international stocks, 1.1 percent in global stocks, 27.4 percent in fixed income, and 14.1 percent in other assets were within the approved long-term strategic asset allocation ranges.
Judith D. Freyer, Executive Vice President and Chief Investment Officer, reviewed the 2017 year-to-date performance of 7.9 percent within the framework of global economic and political events. The Balanced Investment Portfolio exceeded the return of the Asset Mix Policy Benchmark year-to-date and for the one year ended May 31, 2017, as well as for the 10, 15, and 20 years ended May 31, 2017. The Policy Benchmark assumes passive management of the portfolio using index funds. The portfolio also exceeded the 6 percent Pension Plan actuarial assumption for the one year ended May 31, 2017, as well as for the 10, 15, and 20 years ended May 31, 2017.
The Balanced Investment 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 May 31, 2017, the portfolio had a market value of $9.1 billion.
The Directors reaffirmed the designation of the following advisers:
They also engaged Deloitte & Touche LLP as independent auditors.
The next meeting of the Board of Directors is scheduled for October 26–28, 2017. For further information, please contact the corporate secretary at csecretary@pensions.org.