From the Worldwide Faith News archives www.wfn.org
Pension agency temporarily halts base credit on fund
Mon, 24 Feb 2003 14:45:24 -0600
Feb. 24, 2003 News media contact: Tim Tanton7(615)742-54707Nashville, Tenn.
By United Methodist News Service
The United Methodist Church's pension and health benefits agency is
temporarily suspending the 3 percent base-interest credit that it pays on
accounts in its Diversified Investment Fund. The action, taken in response to
uncertainty in the world and financial markets, is effective March 1.
"As always, the general board's actions are based on a consistent strategy of
protecting the long-term security of participants and their beneficiaries,"
said Barbara Boigegrain, top staff executive of the United Methodist Board of
Pension and Health Benefits in Evanston, Ill.
The board said that its suspension of the base credit would strengthen its
ability "to deliver on current and future benefit promises." The Diversified
Investment Fund is the agency's largest pool of investment dollars, with $8.5
billion in assets.
The suspension of the base-interest credit will affect about 40,000 active
clergy and lay employees of the United Methodist Church, according to agency
spokesman Michael Lee. Those are employees with accounts in the Ministerial
Pension Plan (MPP), Staff Retirement Benefits Program (SRBP) and the
Cumulative Pension and Benefit Fund (CPBF).
In November 2000, the board lowered its base credit rate on the fund from 6.5
percent to 3.0 percent for the first time since the 1970s, as the
long-running U.S. bull market reached its end. Since then, the financial
markets have struggled, and conditions have been exacerbated in recent months
by uncertainty about a possible U.S.-led war with Iraq.
"As a result of the extended bear market - the second worst in the history of
the U.S. stock market - action is needed to prevent further deterioration of
DIF's reserve position that occurs when the 3 percent base-credit interest is
paid," the board said in a statement.
While the base-interest credit is suspended, the board won't apply any
interest to deposits in the fund. "No action is required by participants,"
the agency said. "Account balances will continue to reflect existing and
future contributions, and any interest earned through Feb. 28, 2003." When
the markets improve and the fund's reserve position is stronger, the agency
said it would consider reinstating the base credit.
"DIF remains a viable and reliable investment vehicle largely because of the
actions of the board of directors over the last several years," said Dave
Zellner, managing director of finance and investments.
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United Methodist News Service
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