wfn.org | Pension board sets rate for accounts, keeps eye on changing market

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

Oct. 25, 1999  News media contact: Tim Tanton·(615)742-5470·Nashville, Tenn.
10-31-71B{563}

NOTE: This report is accompanied by a sidebar, UMNS story #564.

PHILADELPHIA (UMNS) - Beneficiaries of the United Methodist Church's primary
investment plan will receive a 6.5 percent base rate on their accounts in
2000, the same rate they have drawn for 25 years. But they should resist the
urge to pat back a yawn. 

What happens beyond next year is uncertain, as the United Methodist Board of
Pension and Health Benefits tries to develop a process for setting the
credit that takes into account reserve levels and changing market
conditions. 

The board's governing members approved the 6.5 percent base credit rate at
their Oct. 22-23 meeting in Philadelphia. The annual rate will be applied to
all account balances in the board's Diversified Investment Fund.

The board's governing members also decided to set a target reserve level at
18 percent of the total account balances in the fund. That will protect the
participant balances from a potential market downturn. 

That number will also help determine the amount of possible special
distributions that are paid out of the fund during the year. At the end of
each October and April, the board will compare its actual reserve levels
with the 18 percent, and anything above the 18 percent will be paid to
participants in the Diversified Investment Fund. The next special
distribution will be considered Oct. 29, the last business day of this
month.

"The board has struggled for a long time between having the appropriate
reserve level to protect the stated rate and distributing as much as we can
to the participants," said Treasurer Gale Whitson-Schmidt.

The Board of Pension, based in Evanston, Ill., manages the pension and
health benefits for some 65,000 United Methodist clergy members, employees,
retirees and spouses. The Diversified Investment Fund has more than 40,000
active participants.

Board staff discussed the base credit rate with benefits officers from the
church's annual (regional) conferences recently. The benefits officers
acknowledged that a changing market environment would present a big
challenge and said the board should do what it can to protect the
diversified fund. They also strongly encouraged the agency to retain the 6.5
percent rate at least through 2000, Whitson Schmidt said.

The board is trying to help participants understand how the reserve works
and how it supports the base credit rate, Whitson-Schmidt said. "As market
conditions change, the board has a big education and communication challenge
helping our participants understand the impact of the market changes on the
Diversified Investment Fund." 

The fund had gained 5.5 percent as of Sept. 30, compared with an industry
benchmark of 3.1 percent.

During their meeting, board members also received an update on another
distribution that is already under way. About 17,000 checks, totaling $43
million, are being sent to people covered by the Defined Contribution
Annuity Reserve, said board member Victor L. Smith of Louisville, Ky. Those
beneficiaries are retirees under the Ministerial Pension Plan.

Board members approved an investment ethics resolution that is being
cosponsored with the United Methodist Board of Church and Society. The
resolution will be sent to the denomination's top lawmaking body, the
General Conference, for action. General Conference meets May 2-12 in
Cleveland. 

The resolution amends an existing statement in the denomination's Book of
Resolutions. In a paragraph describing the church's witness on current
issues, the resolution adds this sentence: "The Church also continues to
bring witness on such issues as: international fair labor practice; domestic
and global human rights; lending practices or policies for lesser developed
communities; and issues of violence to persons, firearms sales and gun
policies." Later, the resolution states that the church will avoid investing
in companies that make components for anti-personnel weapons or that have as
their primary business the production, distribution or sale of handguns and
assault-type weapons, or ammunition for such weapons.

Elsewhere in the resolution, the list of investments that are affirmed by
the church was broadened to include affordable housing and community
development in urban and rural areas. The Board of Pension already is an
active investor in such activities.

The resolution also replaces an outdated paragraph condemning South Africa'
apartheid policies.
The new paragraph states that the church shall "seek opportunities to invest
in companies, banks, funds or ventures that invest or have operations in
African and other poor countries, provided that those countries respect
human and labor rights and have a record of trying to raise living standards
of their people and work to maintain ecological integrity."

Items such as the investment ethics resolution represent the board's
emphasis on social action coupled with management of the church's pension
and benefits dollars. As a major institutional investor, the board is able
to get publicly traded companies to address social issues and even make
changes. 

"That's where we wield influence," said Bishop Bruce Blake of Oklahoma City,
president of the Board of Pension.

Concerns raised by the board recently have included sweatshop labor
conditions, lack of diversity on boards of directors and high executive
compensation.

Governing members heard an update on the board's efforts to address the
HIV/AIDS crisis in Africa. Agency staff members have been corresponding with
pharmaceutical companies about the crisis, and one business responded that
it is doing research and providing physician training and education on AIDS
in Africa. The board's focus on the issue is in response to a general appeal
by United Methodist Bishop Felton E. May of the Baltimore-Washington Annual
Conference.

In other investment-related business, the board acted on a request from a
pastor who wants participants to have more influence in directing how
contributions by their employers are invested in the Diversified Investment
Fund. The board decided to pass the request on to the executive committee
for consideration in the next quadrennium.

During the regular treasurer's report, the board members learned that as of
Oct. 22, the agency's Domestic Stock Fund was up 6.2 percent so far this
year; the Domestic Bond Fund was down 0.2 percent; the Money Market Fund was
up 3.5 percent; the Balanced Social Values Plus Fund was up 2.4 percent; and
the International Stock Fund was up 32.4 percent.

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United Methodist News Service
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