wfn.org | ELCA Council Agrees to Retiree Health Plan Remedy

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ELCA NEWS SERVICE

November 22, 2002

ELCA COUNCIL AGREES TO RETIREE HEALTH PLAN REMEDY
02-276-FI

     CHICAGO (ELCA) -- The Church Council of the Evangelical Lutheran
Church in America (ELCA) agreed to increase the church's contribution as
part of a proposal to fully fund a program that helps early retirees pay
their health care premiums.  Trustees of the ELCA Board of Pensions
offered the five-point proposal to counter a growing unfunded
obligation, mostly for retirees with predecessor church service.
     The Church Council is the ELCA's board of directors and serves as
the legislative authority of the church between churchwide assemblies.
The council met here Nov. 15-17.  Assemblies are held every other year;
the next is Aug. 11-17, 2003, in Milwaukee.
     The ELCA Board of Pensions provides health, retirement, disability
and survivor benefits and related services for nearly 50,000 pastors,
lay ministers and other church workers and their families, and nearly
11,000 congregations and other ELCA sponsoring organizations.  The Board
is based in Minneapolis.  Three Lutheran churches merged to form the
ELCA in 1988.
     "Sharply increasing costs for retiree medical benefits," caused
largely by rising costs for prescription medicine, and a closer look at
trends in medical expenses showed that the nearly $6 million in the ELCA
budget each year was not enough, David G. Adams, vice president for
research and design, ELCA Board of Pensions, told the council.	He said
the Board estimates the ELCA would face an unfunded obligation of $129
million over the next 30 years, in today's dollars, if current funding
continued unchanged.
     The council gave its approval to the first provision of the five-
point proposal -- the only part needing the council's consent.	It
agreed to increase the ELCA's budgeted contribution from $5.70 million
to $6.20 million in 2003, $6.45 million in 2004 and $6.70 million in
2005.  The budgeted amount will increase 1 percent each year after that
to help cover post-retirement medical obligations.
     The second part of the proposal will phase in, over the next four
to five years, increases in the contribution amount early retirees and
pastors on leave from call pay for health benefits coverage.  For
example, said Adams, if this were in place in 2003, then those under age
60 would pay an estimated $369 and those ages 60 to 64 would pay about
$510.
     In the early 1990s, when the ELCA established the subsidy for
early retirees, "bishops felt the cost of health care was an obstacle"
for those whose circumstances indicated they should retire before age
65, said John G. Kapanke, president, ELCA Board of Pensions.
     "In the past 10 years, as a result of investment performance in
the pension plan, people have a higher pension on average today than
they had 10 years ago," said Kapanke.  Although early retirees do face
high medical costs, they are now potentially more able to absorb those
costs than they were when the subsidy was established, he said.
     The third part of the proposal will increase the contribution ELCA
congregations pay monthly by 0.9 percent of defined compensation.  The
increase will be phased in over several years and will support retiree
contributions.	The Board of Pensions will eliminate a separate
administrative expense and use health plan contributions to cover all
health plan administrative expenses.
     While the first three parts of the proposal increased funding from
the ELCA, from congregations and from early retirees for the
post-retirement health plans, the remaining two parts change the
benefits of all health and pension plan members.
     The fourth part of the proposal eliminates a separate pension plan
administrative expense congregations pay and takes that money from
investment earnings.  "The Board of Pensions collects 0.6 percent of
defined compensation for administration costs," said Kapanke.  Instead,
about three basis points or 0.03 percent of investment income will be
used to cover those expenses.
     After 35 years, Adams gave as an example, a member's pension would
show about a 0.5 percent reduction.
     The final part of the proposal will increase the amount plan
members pay for prescription medicine.	Generic drugs will increase from
$5 to $6 per prescription; "preferred" brand drugs will increase from
$12 to $20 per prescription; and "nonpreferred" brand drugs will
increase from $27 to $40 per prescription.
     In 2004, members who receive an ELCA supplement to Medicare
benefits will be reimbursed for 80 percent of unreimbursed costs for
Medicare Part A (hospital) and Medicare Part B (medical), after a $150
annual deductible.
     After the proposed changes in funding and management, the church's
unfunded obligation of more than $129 million would be cut to about $1
million, said Adams.
     Kapanke commended the process it took to find a complex solution
to a complex problem.  There was "great collaboration" between the ELCA
Church Council, the officers of the church and the Board of Pensions, he
said.
-- -- --
     The Web site of the ELCA Board of Pensions is at
http://www.elcabop.org/ on the Internet.

For information contact:
John Brooks, Director (773) 380-2958 or NEWS@ELCA.ORG
http://listserv.elca.org/archives/elcanews.html