wfn.org | Newsline: Brethren Pension Plan notifies annuitants of recalculated benefits

[CoBNews <CoBNews@brethren.org>]

Newsline: Church of the Brethren News Service, News Director Cheryl Brumbau gh-Cayford, 800-323-8039 ext. 260, cobnews@brethren.org

BRETHREN PENSION PLAN NOTIFIES ANNUITANTS OF RECALCULATED BENEFITS

(Aug. 28, 2009) Elgin, IL -- Brethren Benefit Trust (BBT) has sent notifica tion letters for recalculated annuity benefits for Church of the Brethren P ension Plan annuitants, on Aug. 19.

Back in April, the BBT Board determined that because the market decline was  so severe, it was necessary to recalculate all annuitized pension accounts  at an assumption rate of 5 percent in order to preserve the solvency of th e Retirement Benefits Fund, which continues to be well underfunded.

The recalculated benefit will be reflected in the October payment to Pensio n Plan annuitants.

Knowing that this would be difficult for many annuitants, but would present  a significant financial hardship for some, BBT has established a grant pro gram to soften the reduction. This grant program, which will be reviewed an nually, will use non-pension funds to pay out an amount that is equal to or  less than the actual reduction in benefits to qualifying annuitants.

An application for the grant program was included in the notification lette rs mailed last week. The Brethren Pension Plan encourages members to comple te and return the application form if they need this assistance.

In anticipation of questions resulting from this significant change, BBT is  offering the following set of questions and answers:

Question: The markets have been doing well over the past few months, so why  do we need to still go through with the reduction in Pension benefits? Answer: By Aug. 9, the markets had gained 11.9 percent for the year, as mea sured by the S&P 500. However, even with the positive market activity of th is year's second quarter, BBT estimates that the Retirement Benefits Fund c urrent funding status is approximately 70 percent--a slight improvement fro m the Dec. 31, 2008, level of 68 percent. Currently, benefit payments of ap proximately $1.2 million are disbursed to annuitants every month. At this r ate, even with the recent market returns flowing into the fund, BBT has hig h confidence that the fund will remain underfunded and could simply evapora te without this reduction in benefits. This benefit reduction is still very  necessary.

Q: When might we see our benefits increase? A: This question is more difficult to answer. Assuming the markets continue  to recover, the assets of the Retirement Benefits Fund will likewise recov er, based on the implementation of this benefit reduction. BBT simply does  not know how quickly this will happen. The present goal is for the fund to  be 100 percent funded--able to meet all of its benefit obligations today an d into the future. Returning the Retirement Benefits Fund to fully funded s tatus while continuing to pay out monthly benefits will take many years. Ho wever, once this goal has been met, the next step is to pursue two goals si multaneously--build up the Pension reserve to meet future financial crises,  and pPay out additional benefits. Benefits were recalculated using a 5 per cent assumption rate, but all past increases that were applied to an annuit ant's original benefit have been retained in the recalculation process and  are reflected in the new benefit amount.

Q: Why did it take longer than expected to recalculate benefit amounts? A: The records of the more than 1,500 annuities span 40-plus years of servi ce to the denomination. Many of the early records pre-date electronic recor dkeeping, and approximately 75 percent of all annuity records have migrated  through three different recordkeeping software systems. Many of these annu ities have received several percentage increases over the past 30 years. Th ese are several important factors that have made the recalculation process  complex and have required a great deal of "hands-on" interaction. As BBT is  committed to making sure each record was recalculated accurately, the proc ess required more time than originally estimated. BBT promised at least 30  days' notice regarding a change in benefit, so the time needed to accuratel y recalculate benefits determined the October start date for the recalculat ion to be reflected in monthly payments to annuitants.

Q: What is BBT doing to share the pain of these reductions? A: Cost of living increases have been frozen for BBT staff, and positions t hat are open but not deemed critical at this time are not being filled. Sta ff also are trying to reduce expenses where possible by delaying or elimina ting projects. To date, BBT's expenses are more than $200,000 under budget  for the year against an expense budget of $3.3 million. Today, BBT has five  fewer staff members and an expense budget that is $500,000 less than in 19 99. While BBT is committed to managing expenses, it does not serve our memb ers to undercut on customer service. Maintaining a strong organization and  offering excellent service to members will increase resources and benefit B BT members.

Q: How did the Retirement Benefits Fund become underfunded, and why did BBT  return to a uniform assumption rate of 5 percent? A: This situation did not happen overnight. The sharp decline of the market s in 2008 had a huge impact on the Retirement Benefits Fund, but for a few  years, a higher percentage rate was being paid out than was being returned  through investments. BBT attempted to maintain the levels of benefits for e xisting annuitants by lowering rates for new annuitants, but that was not e nough to offset the high rates being paid out. BBT has striven to pay the h ighest benefits possible to its members, including paying out 13th checks d uring some years when earnings were good and actualized assessments indicat ed that the fund was maintaining adequate reserves. Changing to a uniform 5  percent assumption rate is the only effective way to remedy the underfunde d status of the fund. When the Retirement Benefits Fund is fully funded onc e again, and the markets allow it, members will once again benefit from tha t prosperity.

The Brethren Pension Plan offers a section of FAQs at www.brethrenbenefittr ust.org. For further questions contact Scott Douglas, Pension Plan director , at 800-746-1505.

The Church of the Brethren is a Christian denomination committed to continu ing the work of Jesus peacefully and simply, and to living out its faith in  community. The denomination is based in the Anabaptist and Pietist faith t raditions and is one of the three Historic Peace Churches. It celebrated it s 300th anniversary in 2008. It counts some 125,000 members across the Unit ed States and Puerto Rico, and has missions and sister churches in Nigeria,  Brazil, the Dominican Republic, Haiti, and India.

(Patrice Nightingale and others in the communications staff at BBT provided  this report.)

># # #

>For more information contact:

>Cheryl Brumbaugh-Cayford
>Director of News Services
>Church of the Brethren
>1451 Dundee Ave., Elgin, IL 60120
>800-323-8039 ext. 260
>cobnews@brethren.org