wfn.org | [PCUSANEWS] BOP 'smoothes out' experience apportionments

[PCUSA NEWS <PCUSA.NEWS@ECUNET.ORG>]

Note #9033 from PCUSA NEWS to PRESBYNEWS:

05625
Nov. 22, 2005

BOP 'smoothes out' apportionments

Change will eliminate dramatic annual fluctuations in pension increases

by Jerry L. Van Marter

PHILADELPHIA - The Presbyterian Church (U.S.A.) Board of Pensions (BOP) has
adopted a new formula for calculating "experience apportionments," the
periodic increases in pensions and pension credits for participants in its
retirement plan.

	Experience apportionments are percentage increases in the pensions of
retired plan members and the pension credits of active members. Historically,
they have been calculated annually on the basis of the BOP's pension fund
reserves and that year's investment performance.

	The new formula, which goes into effect on Jan. 1, uses a "smoothed"
calculation to spread out apportionments and eliminate dramatic fluctuations
that have characterized recent apportionments.

	For instance, the apportionment for 1994 was 3 percent, but in 1995
jumped to 8 percent; in 1997 it was 11 percent, but dropped to 10 percent for
1998 and 9 percent for 1999. When the bottom dropped out of the stock market,
it plummeted to 3 percent for 2000 and zero in 2001 and 2002.

	"Wouldn't it be nice, said Donald R. Fleischer, chair of the task
force that designed the new formula, "to spread out benefits over more years,
to create some generational equity?"

	The new policy will eliminate "the higher highs and lower lows" in
favor of a more consistent pattern of apportionments, he said.

	Calculations by the board's actuaries indicate that apportionments
won't be affected much by the new policy. If it had been in use over the past
15 years, apportionments would have averaged 3.3 percent; the actual average
was 3 percent. Projections for the next 15 years  show a 3.5 percent average
using the old formula and a 3.6 percent average for the new one.

	The goals of the new policy, Fleischer said, are to maintain the
fully funded status of the pension plan, keep pensions in line with inflation
and be fairer to all members over the long haul.

New drug plan drives down rates

	Medicare's new prescription drug benefit is driving down subscription
rates in two BOP programs. The board voted to reduce the monthly Medicare
Supplement dues for regular plan members from $194 to $174, effective Jan. 1.
Prescription drugs account for about 80 percent of Medicare Supplement costs.

	The board also reduced monthly subscription rates for Medicare
Supplement participants in the Affiliated Benefits Program from $264 to $244.

	In other recent actions, the BOP:

	approved an adoption-assistance program that will provide $3,000 per
child to families for adoption-related expenses, effective Jan. 1. Money for
the program will come from the "Relief of Conscience" fund, which sets aside
dues of members conscientiously opposed to abortion; 

	approved a 2005 Christmas Gift of $250 for every single person and
$500 for every married couple receiving BOP income supplements. The gifts
will go to 208 single persons and 86 couples.

	increased the maximum effective salary for calculation of disability
benefits and the Lump Sum Death Benefit for active members from $70,000 to
$90,000.

	raised the maximum income levels for Income Supplement recipients for
2006 from $23,760 to $24,120 for single persons and retained the level for
married couples at $28,920.

	increased the Education Benefit from $6,000 to $9,000 per year.

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