wfn.org | Agency asserts right to change investment fund policies

[NewsDesk <NewsDesk@UMCOM.ORG>]

Nov. 28, 2001  News media contact: Tim Tanton7(615)742-54707Nashville, Tenn.
10-71B{558}

NOTE: This report is accompanied by a sidebar, UMNS story #559.

By United Methodist News Service

Participants in the United Methodist Church's Diversified Investment Fund
(DIF) may be limited in their ability to withdraw money at full credited
value after Jan. 1, if the denomination's pension benefits agency decides a
change in rules is necessary.
 
Responding to uncertainty in the financial markets, directors of the United
Methodist Board of Pension and Health Benefits took action Nov. 17 to affirm
their right to change rules related to the fund, the agency's largest pool
of investment dollars. 

"If we make any changes, they are going to be protect those people that use
DIF as a long-term investment vehicle," said Dave Zellner, a staff executive
with the board in Evanston, Ill.

The directors adopted two resolutions during their Nov. 16-17 meeting in
Denver that will affect participants in the fund.

Under one of those resolutions, participants will receive a 3 percent annual
base interest credit rate on their accounts, effective Jan. 1. The rate
continues the level set a year earlier by the board and put into effect last
Jan. 1. The base credit rate had been 6.5 percent for many years, but the
changing markets led the board to decide at its fall 2000 meeting to lower
the rate to 3.0 percent.

The rate will be 3 percent until further notice, Zellner said.

In the other resolution, the directors stated that, effective Jan. 1, they
shall have the right to implement policies regarding the Diversified
Investment Fund at their discretion and without notice to participants. Such
policies include but aren't limited to the following:

7	"Limit the ability of participants to withdraw funds at any time
from the Diversified Investment Fund at full credited value or otherwise.
7	"Change the base interest credit rate.
7	"Establish one or more separate diversified investment vehicles for
any participant group, so that participants within a group share risk among
themselves rather than across all participant groups.
7	"Impose withdrawal penalties on participants who withdraw funds
before a stated 'event,'" such as retirement, long-term disability or death.

The directors also "may impose an immediate reduction in the credited value
for any participant group with deposits in the Diversified Investment Fund,"
according to the resolution. The reduction could be imposed on the entire
fund or on one or more of the separate diversified investment options
established as a result of the resolution. "The board of directors will take
such action only after ... it deems such action justified due to an
extraordinary loss of market value and after it has carefully considered and
pursued other alternatives."

"There will be some changes affecting conference deposits, and the board
will be having a conference call with conference benefits officers and
treasurers next week to discuss the changes," Zellner told United Methodist
News Service on Nov. 28. Those changes will include offering a separate
diversified investment option for annual conferences next year, he said.

Participants currently able to withdraw funds from the Diversified
Investment Fund at any time may continue to do so at full credited value
until Jan. 1. Afterward, participants may continue to withdraw funds at full
credited value "to the extent consistent with the policies" of the board,
according to the resolution.

The directors want to protect people who are investing long term in the fund
for retirement, Zellner explained. "If we got into a position where we had
an extended period where our reserves were negative, and people came to the
window and took their money out, that would harm people who use DIF as a
long-term investment vehicle."

The Diversified Investment Fund has a little more than $11 billion, compared
with slightly less than $12 billion at the end of last year. "We've
recovered nicely from the (markets') bottom on Sept. 21, but so far this
year, our assets are down a ... little over 5 percent," Zellner said.

After the Sept. 11 terrorist attacks on America, the stock markets dropped,
and the board's reserves - the cushion that protects participants' balances
-- fell to a negative figure. However, they have recovered to a positive
figure of just less than 1 percent, Zellner said. The board's target for
reserves is 14 percent. The agency's goal is to keep the fund's net assets
at a level equal to 14 percent of participant account balances.

For the year to date, as of Nov. 27, the fund's domestic stock segment was
down 10 percent; the international segment was down 20 percent; and the
fixed-income segment was up 8 percent.

The board's Personal Investment Plan funds mirrored those performances. As
of Nov. 21, the Domestic Stock Fund was down 13.1 percent; the Domestic Bond
Fund was up 8.0 percent; the Money Market Fund was up 7.2 percent; the
Balanced Social Values Plus Fund was down 7.3 percent; and the International
Stock Fund was down 19.1 percent.

During their Denver meeting, the board directors also:
7	Heard a report from Barbara Boigegrain, top staff executive,
reminding them of the responsibility to provide a high level of service and
that their constituents have faces and names. "We need to keep focused on
participant needs and what it requires of each of us," she said.
7	Honored the late John English, a longtime board member who died in
March, with the Clay F. Lee Award for his contributions to the agency. (See
sidebar.)
7	Adopted the Healthflex Strategic Direction Statement, with the
commitment to "provide a core health program with incentive-driven options
and a diverse range of educational resources for our eligible participants
to choose, from an informed position, those benefits that would best balance
stewardship and individual needs."
7	Discussed presentations by William M. Mercer Inc. representatives
related to the challenges of providing health care. Dr. Tony Kotin, national
leader for knowledge and service delivery for Mercer's Health and Group
Practice, spoke about medical research, pharmacology and technology. George
Wagner, principal and national leader of Mercer's Healthcare and Group
Benefits Services, discussed factors affecting costs and what employers are
doing to manage the quality of health care delivery.
7	Approved a committee recommendation to tour a maquiladora factory
site in Mexico during their next meeting, set for March 13-16 in San Diego.

# # #

Mike Lee, senior communication strategist with the United Methodist Board of
Pension and Health Benefits, contributed information for this story.

*************************************
United Methodist News Service
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