wfn.org | Benefits and Service Improvements

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5-March-1997 
97112 
 
                Benefits and Service Improvements 
                   Okayed by Board of Pensions 
 
                      by Jerry L. Van Marter 
 
PHILADELPHIA--Participants in the benefits plan of  the Presbyterian Church 
(U.S.A.), administered by the Board of Pensions are due for another 
"experience apportionment" -- of 6 percent -- in 1998, and their employing 
organizations will receive a 1 percent dues credit next year, continuing a 
run of strong performances by the Board's health-care and investment 
operations. 
 
     In an unusually busy meeting March 1, the Board also approved a number 
of other "enhancements" in its pension benefits, okayed a pilot 
reorganization project of its customer service operations that will put 
more regional representatives in the field and moved to entice 
nonparticipating Presbyterian organizations into the denomination's 
benefits plan by setting a cap on the amount of salary on which major 
medical dues will be calculated. 
 
     Many of the changes, set to take effect in 1998, must be approved by 
the upcoming 209th General Assembly in Syracuse, N.Y. 
 
          Compromise struck on experience apportionment 
 
     In what has become a spirited annual debate, board members voted to 
give a 6 percent "experience apportionment" -- a 6 percent increase in 
pensions for retired plan members, survivors and those on disability and a 
6 percent increase in accrued pension credits for active and inactive plan 
members -- in 1997.  Last year the Board granted an 8 percent 
apportionment. 
 
     The apportionments are based primarily on the Board's investment 
performance, actuarial experience and level of reserves in the pension 
fund. And typically the debates within the Board on the amount of the 
experience apportionment are waged by members of the Board's Investment 
Committee -- who are cautious about the performance of the stock market and 
prefer higher reserves -- and the Pension Committee, which generally 
prefers to put more money in the hands of retirees and other plan members 
rather than maintain a higher reserve. 
 
     Staff recommended a 5 percent apportionment, a proposal that was 
endorsed by the Investment Committee.  The Pension Committee recommended 6 
percent. Board member the Rev. Heidi Peterson, a pastor from Overland Park, 
Kan., suggested 7 percent.  All three proposals would have left the Board's 
pension fund reserves at or near the 20 percent "ceiling" established by 
the Board as a guideline in 1994. 
 
     Christopher W. Smith of Wilton, Conn., chair of the Investment 
Committee, in urging the 5 percent apportionment cautioned that "there has 
been no major correction in the stock market since 1990."  The current bull 
market -- the Board has  realized double-digit returns on its investment 
portfolio in 1995 and 1996 -- "won't last forever," Smith said. 
 
     David Greer, a retired bank trust officer from Omaha, Neb., and a 
member of the Pension Committee, countered that the calculations used to 
determine the Board's reserves actually undervalue the portfolio and that 
it would take an 11 percent apportionment to spend the reserves down to the 
reserve ceiling.  He urged passage of the 6 percent proposal. 
 
     Peterson argued that "the Board does not exist for a large reserve 
fund but for the sole benefit of plan members."  The Rev. William Henning, 
recently retired executive presbyter for Arkansas Presbytery, agreeing with 
Peterson's 7 percent solution, said, "We can't anticipate future [stock 
market] catastrophes -- we must attend to good stewardship now." 
 
     But Madelynn Matlock of Cincinnati, another member of the Investment 
Committee, said that the changing demographics of plan members and benefits 
changes being implemented by the Board mean that "future pay-ins will be 
less than pay-outs, so we best be prudent." 
 
     The 7 percent proposal was defeated 13-8 and the 5 percent 
recommendation lost 14-7.  The 6 percent apportionment was then quickly 
approved, 17-6. 
 
         Employers get dues credit, effective salary cap 
 
     "We have had great results in the major medical plan," reported Beach 
Hall of Rogers City, Mich., chair of the Board's Healthcare Committee. 
After experiencing a deficit of  nearly $20 million at the end of 1988, the 
Board's major medical fund realized a net income of $17 million in 1996 -- 
the fourth straight year the major medical plan of the Board operated in 
the black.  And for the first time in many years, the recommended 
contingency reserve for the major medical plan -- $30 million -- has been 
reached. 
 
     As a result, the Board voted to maintain major medical dues for 
employing organizations at 16 percent of "effective salary" and granted a 
dues credit for the second consecutive year.  This year employing 
organizations are receiving a one-half of 1 percent credit; in 1998 it will 
be a full 1 percent. 
 
     The Board also took a dramatic step to try to entice nonparticipating 
employing organizations into the denominational major medical plan by 
placing a cap on the amount of effective salary on which the 16 percent 
dues are calculated.  The cap, beginning in 1998, will be 150 percent of 
the churchwide median salary for pastors (currently $34,900).  Thus an 
employing organization would only pay major medical dues on up to $52,350 
of any employee's effective salary. 
 
     Currently participation is mandated only for installed pastors serving 
churches.  The cost of the major medical plan for some Presbyterian-related 
organizations, particularly those with numerous higher paid staff members, 
is relatively high because the plan incorporates cost sharing among all 
contributors in order for it to be affordable for small and less-well-off 
churches.  For those employers who are not mandated to be in the plan, the 
existing cost of participation -- 16 percent of effective salary -- "is so 
financially onerous to many employers that they have left altogether," said 
Margaret Mellen, the Board's vice president for health care. 
 
     "The cost of participation by employers of higher paid staff has been 
a festering sore as long as I've been around," Hall noted.  Mellen 
estimated that the employers of about 1,400 plan members will get some 
relief as a result of the salary assessment cap. 
 
               Several pension benefits "enhanced" 
 
     Reflecting the continuing robust health of the church's pension plan, 
the board approved a package of  "enhancements" to the plan, to be 
effective in 1998.  They include 
 
      *   an increase in the minimum salary continuation benefit for the 
          beneficiaries of a retired member who dies from $2,000 to $5,000 
      *   an increase in the maximum salary on which the lump sum death 
          benefit is calculated from $40,000 to $50,000 
      *   the addition of a lump sum death benefit for active members who 
          die without dependents an increase in the maximum salary on which 
          disability benefits are calculated from $50,000 to $60,000 
      *   an increase in the educational benefit paid to eligible children 
          of plan members who die from $2,500 to $4,000 per year for up to 
          four years beyond high school 
      *   the addition of a provision by which the salary continuation 
          benefit and 75 percent of the lump sum death benefit may be paid 
          out early to terminally ill plan members 
      *   the addition of a provision by which the pensions of plan members 
          who retire before they are eligible to receive Social Security 
          are adjusted so that their total retirement income from both 
          pension and Social Security is "level" throughout retirement. 
 
   More personal service is aim of pilot reorganization project 
 
     Board president John Detterick announced a "service delivery 
initiative" in which two teams made up of staff members from all areas of 
the Board's work will be assembled into a "cross-functional" teams to 
provide "one-stop shopping" to plan members in a given region. 
 
     The first two teams will be operational by April 1 and will work on a 
pilot basis for one year to serve the synods of South Atlantic and Trinity. 
Each team will include the Board's regional representative for the area in 
which the synod is located plus staff members from the member services, 
major medical, call center and pensions departments of the Board. 
 
     Senior vice president Francis Maloney said the familiarity of dealing 
with the same team members on an ongoing basis will afford plan members 
"ease of access, better relationships and better accountability with the 
Board of Pensions." 
 
      The Board endorsed the new service plan, including the addition of 
four regional representatives, which will raise to 10 the number of field 
representatives deployed by the Board throughout the church.  The new 
regional representatives are scheduled to be in the field by early in 1998. 
 
     The goal of adding additional regional representatives, according to 
vice president for church relations the Rev. Paul Stavrakos, is to provide 
more face-to-face service to plan members, better address the diverse needs 
of plan members, be more proactive in addressing plan members' problems, 
and better acquaint plan members with new and improved services the Board 
may offer. 
 
        Co-pay limits raised for prescription drug program 
 
     About the only problem the Board has not been able to solve is a 
continuing increase in the cost of its prescription drug program.  "Costs 
have not come under control," said Hall, "and the culprit is the 
out-of-pocket cap."  The problem, Board officials said, is most acute among 
participants in the Medicare Supplement program. 
 
     The current co-payment limit is $200, an amount Hall said some plan 
members reach in less than a month.  Most major medical plans have no 
co-payment maximum, he added. 
 
     The Board approved a rise in the prescription drug co-payment limit to 
$500.  To offset the higher co-payment limit for active members, the Board 
reduced the overall major medical co-payment limit from 6 percent minus 
$200 to 4 percent for active plan members.  The major medical co-payment 
limit for Medicare Supplement participants will change from 4 percent minus 
$200 to 4 percent. 
 
             Sibery's tenure as chair comes to an end 
 
     For the first time in six years, the Board of Pensions will have a new 
chair.  D. Eugene Sibery of Cape Coral, Fla., completes his term of service 
on the Board at the conclusion of the upcoming General Assembly. 
 
     With several special guests in attendance, including General Assembly 
Council chair Youngil Cho and interim executive director the Rev. Frank 
Diaz, the Board paid tribute to Sibery at a dinner in his honor Feb. 28. 
 
     The following morning the Board elected as his successor Gloria Wilson 
of Tempe, Ariz.  She is professor of media and computers at Arizona State 
University and an elder at Crosswinds Presbyterian Church in Tempe. Wilson 
was a liaison to the board from the former Church Vocations Ministry Unit 
of the General Assembly Council prior to her election to the board.  Wilson 
takes office at the July meeting of the Board. 

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