wfn.org | Pension board ponders dues, benefits changes

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Note #6408 from PCUSA NEWS to PRESBYNEWS:

28-February-2001
01082

Pension board ponders dues, benefits changes

Escalating health-care and drug costs force BOP to make tough choices

by Jerry L. Van Marter

PHILADELPHIA - After nearly a decade of relative stability in health-care
costs, and therefore in Medical Plan dues as well, a day of reckoning has
arrived for the Presbyterian Church (USA)'s Board of Pensions (BOP) with
implications for employing organizations and plan members.

	During its Feb. 22-24 meeting here, the Board confronted a return to
double-digit increases in health-care costs in the foreseeable future, and
agonized over the combination of dues increases and benefit reductions that
will be necessary to maintain the Medical Fund  beyond 2003.

	Since 1990, when the Medical Fund had a historic $20 million deficit, the
Board has managed to replenish its reserves to about $40 million. Every year
since 1992, the BOP Medical Plan has had a positive year-end result, and
every year since 1997 employing organizations have received annual dues
credits against the 16 percent they pay in medical dues.

	Those successes were possible because annual increases in health-care
expenses were minimal and because the Board actively participated in managed
care and preferred-provider networks.

	Now, however, the cost benefits of HMOs have topped out; and medical costs
are projected to rise by 10-to-13 percent a year for the next few years.

	Consequently, as the BOP Healthcare Committee heard from Medical Plan
actuary John Cookson of Milliman and Robertson, the Medical Fund will
decline precipitously in 2004 unless dues are increased, benefits are cut,
or both. If no adjustments are made, Cookson said, the fund could have a $20
million deficit again by 2005.

	The Board will take action to increase dues or reduce benefits at its June
meeting here. In the meantime, its regional representatives will present
three scenarios during a series of "mini-consultations" with plan members
and middle governing body officers this spring.

	The scenarios will make clear what steps will be necessary to maintain
adequate reserves: solely through dues increases; solely through benefit
cuts; and through a combination of the two.

	"This is a struggle to determine what's best," said the Rev. Adele
Langworthy, of Long Beach, Calif., the chair of BOP's Healthcare Committee.
"We have to take a very careful look at benefit cuts, the employees' share
of the pain, and at dues increases, the employers' share of the pain, and
come up with the right balance."

	Board members seemed to agree that small steps over the next three or four
years would be preferable to draconian measures that might be enacted in
2004 when the deficit problem is projected to become severe. "We have to
communicate to our plan members that we're not isolated from the problems
we're reading about in the news," Langworthy said.

	To cover rising expenses through dues increases alone would require an
increase from the current 16 percent of effective salary to as much as 20
percent by 2005, Cookson estimated.

	Some of the benefit cuts under discussion: raising deductibles and
out-of-pocket maximums; raising or eliminating the dues cap from the current
150 percent of the churchwide median salary for pastors (now about $40,000 a
year); raising the minimum-participation basis in the plan (now 55 percent
of the churchwide median salary for pastors); raising prescription drug
co-pays and deductibles; and the more radical step of moving to percentage
co-pays for prescriptions rather than flat dollar amounts.

Drug-cost inflation

	Nowhere are increasing costs a more critical problem than in the Board's
Medicare Supplement program.

	Because prescription drug expenses - which account for 70 percent of the
program's cost - are rising exponentially, members of the Healthcare
Committee found little reason to be optimistic.

	"There are only two ways out of these escalating costs," said Cookson. "We
need either a lower drug-cost trend, which I don't see happening, or federal
legislation adding a prescription-drug benefit to Medicare."

	With projected annual increases of 20 percent or more in prescription drug
costs, the Medicare Supplement program is facing a potential $7 million
deficit by 2003, Cookson said.

	Medicare Supplement premiums for the Board's program were raised 20 percent
this year, and it appears that similar annual increases are in store for at
least the short-term future.

3% apportionment approved

	With no discussion or debate - a first - the board approved a 3 percent
pension experience apportionment, effective July 1, despite the first
negative investment performance by the BOP's portfolio in many years.

	"The sky didn't fall in 2000, but it sure came a lot closer to earth," said
R. Michael James, chair of the board's Investment Committee, announcing that
the portfolio showed a 3.8 percent loss for the year.

	"We held up remarkably well, due to our diversified portfolio," commented
Deborah Kuenster of Newton, Mass.

	The off year followed the largest five-year growth period in BOP history,
which came with several double-digit experience apportionments. The robust
long-term health of the board's Pension Fund made the experience
apportionment possible this year.

	The apportionment means that each retired Pension Plan member and surviving
spouse will get a 3 percent increase in his or her pension benefit. Disabled
plan members will receive a 3 percent increase in disability payments.
Active Pension Plan members, including disabled plan members, will get a 3
percent increase in accrued pension credits.

	All experience apportionments are subject to approval by the General
Assembly.

Affiliated Benefits Program proves popular

	The newest board program, the Affiliated Benefits Program (ABP), has
attracted more than 300 participants since its inauguration last August. The
program offers Medical Plan and other optional benefits to church employees
without requiring participation in the full benefits plan. Only installed
pastors serving congregations are required to participate in the full plan.

	Among the organizations now participating in the ABP are members of the
staff of Austin Presbyterian Theological Seminary, employees of Presbyterian
Children's Homes of Texas, and the non-pastoral staff of First Presbyterian
Church of Dallas.

	"This is a chance for real ministry," said the Rev. Robert Smith, special
assistant to BOP president and CEO Robert Maggs. "We now can offer a benefit
to servants of the church who have never had this opportunity before."

	The Board hopes to enroll 800 new participants in the ABP this year.

Robbins re-elected as chair

	Earldean V.S. Robbins, of San Francisco, was re-elected as BOP chair for an
additional one-year term. Joining her as board officers are William E. Rauh,
of Yardley, PA, first vice-chair, and Adele Langworthy, second vice-chair.

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