wfn.org | Pension board approves special pay-out

[NewsDesk <NewsDesk@UMCOM.UMC.ORG>]

Jan. 28 1999        Contact: Tim Tanton*(615)742-5470*Nashville, Tenn.
10-71B{047}

CHARLESTON, S.C. (UMNS) - United Methodist clergy and laity who participate
in the church's largest investment fund will receive a special distribution
of 5 percent for 1998, in addition to the 6.5 percent credit already
approved for their accounts.

Directors of the United Methodist Board of Pension and Health Benefits
approved the additional distribution at their winter meeting, Jan. 25-26.
The move will likely please constituents who had questioned why a special
pay-out was not approved last fall.

The board's investment committee and executive committee had declined in
October to issue the special distribution in addition to the 6.5 percent
credit. At the time, the stock market was down and the board's reserves were
too low to warrant the extra pay-out. However, by the end of the year, the
market had rebounded to the point where the distribution became feasible
again.

"Looking at the balances of funds in October, clearly a special distribution
was not called for," said Barbara Boigegrain, the agency's top staff
executive. The committees made the appropriate decision at the time, she
said, adding: "It's a lesson in the volatility of the markets."

Along with the 6.5 percent credit, the special distribution will give
constituents a total return for diversified investment fund accounts of
11.82 percent for the entire year. The money will be credited to accounts
that had a balance as of Dec. 31 and for which diversified investment fund
earnings were credited during 1998. The distribution will be based on the
amount of time that money was invested in the diversified investment fund
during the year.

The diversified investment fund is the agency's largest pool of investment
dollars. The board typically sets a base credit each year. Then, depending
on how the market performed and the agency's own level of reserves, the
directors decide whether to make a special distribution. Reserve levels and
investment earnings aren't always high enough to justify such a move, and no
such distribution was made in 1990 or 1994 for that reason.

The special distribution will be credited back as of Dec. 31, so it will be
part of 1998 earnings, Boigegrain said. As a result, year-end statements to
participants will be delayed. Annual conference benefits officers will be
notified that conference statements will be reissued, she said.

At its October meeting, the board's investment committee also approved a 6.5
percent base credit for 1999.

The Evanston, Ill.,-based Board of Pension administers benefits on behalf of
the denomination for about 25,000 retirees or survivors and 40,000 active
clergy, lay employees and their families.

The special distribution was only one item on a busy agenda for the board,
which met for the first time since last July. Its regular October meeting
was canceled to devote the staff's time and energy to resolving the agency's
customer service problems. However, board committees did meet last fall,
many of them by teleconference.

In terms of financial performance, 1998 was another good year for the Board
of Pension.

"It was an outstanding year, both in an absolute and relative basis,
relative to our peers," said F. Gale Whitson-Schmidt, chief financial
officer and treasurer.

The diversified investment fund was up 18.3 percent for the year, according
to David Zellner, the agency's director of investments. 

Other funds also fared well. The domestic stock fund was up 23.8 percent;
the domestic bond fund was up 7.8 percent; the money market plus fund was up
6.0 percent; the balanced social values plus fund was up 23.2 percent; and
the international stock fund was up 14.8 percent.

The board has $11.4 billion in assets and liabilities, and $2.4 billion in
net assets. The net assets will drop to about $2 billion after the special
distribution, Whitson-Schmidt said. 

Customer-service issues continue to be a challenge for the agency, and
another year of work lies ahead, Boigegrain said in an interview after the
meeting.

"We are in the middle of the transition period," she said. Companies in the
industry that undergo such changes usually take one and a half to two years,
and the board is in line with that, she said.

"We have cleaned up a lot of our backlog," she said, noting that the agency
has worked through 90 percent of it since last summer. However, some of the
thorniest problems remain, she said. 

"We're going to be far from perfect for another year," Boigegrain said.
"This is a massive conversion. We're turning over every system in the
organization."

Input from conference officers and plan sponsors is critical now, she said.
She met with conference benefits officers last August and again in October,
and many issues related to the problems were raised. "There was a lot of
pain; there was a lot of frustration," she said. The board has enacted
several changes in response to those meetings, including sending an
immediate fax to benefits officers if a bill is being delayed, she said.

Much of the board's meeting was focused on discussing the Benefits 2000
report, which will be presented next year to the denomination's top
legislative body, the General Conference. The report describes the church's
scope of coverage, the board's philosophy and mission, and the challenges
that lie ahead. It identifies the funding of retirees' medical coverage as
the "single most worrisome benefits issue" facing the denomination in the
next century.

"There is significant liability out there" for annual conferences with
regard to the retirees' health care costs, Boigegrain said after the
meeting. The board is trying to raise the consciousness of the denomination
that those costs are increasing and that a viable plan is needed for
addressing them.

Death and disability benefits were another key area of focus in the Benefits
2000 discussions. 

In fine-tuning the report's introduction, directors agreed that pensions and
death and disability coverage should be listed as the mandatory benefits
administered by the agency. They decided to add a line describing health
coverage as an important benefit.

In other business, the board adopted several resolutions. Those included a
revision of its investment policy guidelines to clarify existing
restrictions on certain types of stocks. The new guidelines state that no
investments shall be made in companies that get 10 percent or more of their
gross revenues from tobacco, alcohol or gambling-related activities, or that
sell any product or service that is pornographic. The new guidelines also
spell out more clearly the board's policy about not investing in
military-related activities.

As an institutional investor, the Board of Pension wields considerable clout
with publicly traded companies. The corporate and fiduciary responsibility
committee received an update from staff on the agency's work with several of
those businesses, including Disney. Staff reported that the agency will
continue working with Disney on the company's fair labor practices. Members
of the committee also told staff to look into Disney's possible holdings
involving in adult entertainment, alcohol sales and the distribution of
products with violent content. 

Both the board's investment committee and corporate and fiduciary
responsibility committee agreed not to invest in Chinese government debt
instruments, citing that country's human rights record.

The board's next meeting will be April 23-24 in Skokie, Ill.
# # #

______________
United Methodist News Service
http://www.umc.org/umns/
newsdesk@umcom.umc.org
(615)742-5472