wfn.org | [PCUSANEWS] Board of Pensions bites bullet

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Note #7615 from PCUSA NEWS to PRESBYNEWS:

Board of Pensions bites bullet
03123

Board of Pensions bites bullet

Reluctantly considers dues hike, nixes apportionment

by Jerry L. Van Marter

PHILADELPHIA - Same song, next verse: For the second consecutive year,
depressed financial markets and double-digit increases in healthcare costs
are forcing the Presbyterian Church (USA)'s Board of Pensions (BOP) to
retrench.

It is almost certain that Medical Plan dues will increase by another
percentage point next January - to 18.5 percent of "effective salary."

And Pension Plan members this year won't receive an "experience
apportionment" - a percentage increase in pension payments for retirees and
in pension credits for active members. The board granted experience
apportionments every year between 1992 and 2001.

"Do a heck of a lot of praying," the Rev. Adele Langworthy, of Long Beach,
CA, chair of the BOP'S healthcare committee, suggested during the board's
March 1 meeting. "We're in hard times."

The healthcare committee, which had an unusual extra meeting in January, put
in two days here, trying to find the best ways to deal with mounting expenses
that, in a worst case scenario, could land the Medical Plan in the red as
early as 2004. 

The board pays out more than $100 million a year in healthcare claims.

BOP guidelines call for a contingency reserve of 21 percent to 33 percent of
claims. Without a dues increase, unless trends moderate, the reserve could
drop below the minimum this year and slide into deficit in subsequent years.
"It's a huge financial challenge," Langworthy said.

With the financial markets still down and wildly unpredictable, the board
"simply cannot afford to take on additional liability" by granting an
experience apportionment this year, said Caroline DeEsposito of East Orange,
NJ, chair of the board's pension committee.

DeEsposito noted that 2002 was the third straight year of market losses - the
BOP's investment portfolio lost 9.8 percent last year, dropping in value to
just over $5 billion, down from a high of about $6.5 billion three years ago.
"We understand that retirees need the help an experience apportionment would
give," he said, "but we have to balance that against the health of the plan."

This will be the second year in a row with no experience apportionment. Each
1 percent of apportionment adds $43.5 million to the board's pension
liabilities. Several double-digit apportionments were granted during the boom
years of the mid-1990s.

"There is no safe harbor in these financial-market storms," said the Rev.
Richard E. "Rick" Young, chair of the investment committee. "We're beating
the benchmarks (investment-industry performance standards), but we're still
down. We're uneasy, but not panicky." 

"The Pension Plan is built to withstand the current down market," DeEsposito
said. "We just have to wait for it to recover."

In addition to the 2004 Medical Plan dues increase, Langworthy said the
healthcare committee will probably propose three other revenue-increasing
measures and three new cost-containment measures when the BOP meets in July.

The revenue-generating proposals are: an increase in the minimum basis for
participation in the Medical Plan from 55 percent to 70 percent of the
churchwide median salary for pastors, roughly from $23,760 to $30,240;
charging dues for part-time church workers based on the equivalent full-time
salaries subject to the minimum participation basis; and adjusting Medical
Continuation dues and dues for participants in the Affiliated Benefits
Program according to healthcare cost trends, now running at about 12 to15
percent annually.

The proposed benefit-side changes: raising deductibles and co-pays  to match
the new minimum participation basis; adjusting limits on deductibles and
co-pays to match the new full-time equivalent basis for part-time workers;
and increasing office visit co-pays, which haven't changed since 1999, by
$10.

In other actions, the board:

* Approved the direction of the discussion about the  transfer of  oversight
of Westminster Gardens in Duarte, CA, to Southern California Presbyterian
Homes;

* Voted to expand its  "disease-management programs" for members with chronic
health problems, such as diabetes, asthma and heart disease. More than 1,500 
members, including spouses and children, may benefit from the enhanced
program, which "rolls out" on July 1;

* Heard reports on hospitals' efforts to promote better healthcare and on BOP
opportunities to work more cooperatively with other denominations' healthcare
boards;

* Discussed an effort to raise money for the board's assistance programs,
which now get most of their funds from unsolicited gifts, income from
endowments and the Christmas Joy Offering, with the three people who will
spearhead the campaign: BOP President Rob Maggs; Board Chair Earldean
Robbins, of San Francisco; and Peter Sime, director of assistance and
retirement housing.

* Re-elected Robbins as chair for another year, beginning in July. The BOP's
first vice-chair (succeeding Langworthy, who leaves the board in June) will
be the Rev. Arthur Sundstrom, of Chevy Chase, MD, and its second vice-chair
(succeeding Sundstrom) will be Stephanie Middleton, of Media, PA.

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