Frequently Asked Questions (FAQ)

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FAQ Categories

General Questions

Plan Funding

Investments

Sustainable Investment

Center for Health

Contact

Qualified Domestic Relations Order

TIPS

Questions & Answers

General Questions

What is Wespath Benefits and Investments?

Wespath Benefits and Investments (Wespath) is a not-for-profit administrative agency of The United Methodist Church, responsible for the general supervision and administration of the retirement, health and welfare benefit plans, programs and funds for more than 100,000 active and retired clergy and lay employees of the Church.

All Wespath plans, programs, services and policies are designed to serve and support the financial well-being of participants and their families in accordance with the values and principles of The United Methodist Church.

Wespath is the largest faith-based pension fund in the United States and ranks among the top 100 pension plans in the country.

As a sustainable investor, Wespath is actively involved in shareholder advocacy, proxy voting, portfolio screening and community investing. Investments are made according to values that create a healthy financial bottom line as well as positive social and environmental returns. Wespath remains the largest denominational investor in affordable housing programs for low- and moderate-income families in the nation. To date, we have allocated nearly $1.8 billion to affordable housing and community development investments.

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I am looking for Benefits Access, Benefits Access for Plan Sponsors, Central Conference Pensions (CCP), WebMD or another Wespath-related website. How do I get there?

Our Wespath Related websites page provides links to Benefits Access, Benefits Access for Plan Sponsors, CCP, WebMD (for HealthFlex participants), the Extranet and the Board of Directors website. The page also includes links to all United Methodist general boards, agencies and other UMC connections.

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Plan Funding

Are Wespath's pension plans adequately funded?

Yes. Wespath administers two types of plans: Defined Contribution (DC) and Defined Benefit (DB). DC plans include the United Methodist Personal Investment Plan (UMPIP) and the Retirement Plan for General Agencies (RPGA). DB plans include the Pre-1982 plan and MPP annuities (monthly benefit payments received by retired clergy). The Clergy Retirement Security Program (CRSP) has both DB and DC components.

All DC plans are fully funded. Participants should realize, however, that the value of their accounts will fluctuate up and down with the performance of the investment markets. DB plans provide participants with a specified monthly payment. Accordingly, funded status is affected by the performance of the investments in the plan sponsors’ accounts. Wespath is confident that the current funded status of the DB plans is sufficient to fulfill the plan sponsors’ obligations to their participants unless conditions in the financial markets significantly deteriorate. Ultimately, the plan sponsors/employers (e.g. the annual conferences) are responsible for ensuring that these plans have been fully funded.

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Investments

What do you do to help assure that the assets supporting my retirement plans administered by Wespath are secure?

Wespath Benefits and Investments (Wespath) is a not-for-profit administrative agency of The United Methodist Church, responsible for the general supervision and administration of the retirement, health and welfare benefit plans, programs and investment funds for more than 100,000 active and retired clergy and lay employees of the Church.

The investment assets are legally owned by the funds, plans, and trusts administered by Wespath, which serves as the trustee of these programs. Wespath operates as a fiduciary and is therefore required to meet stringent standards for administering, monitoring and reporting on the assets of its stakeholders. Most of the investment assets are held in custody by the Bank of New York (BNY) Mellon, which acts as Wespath’s custodian and is subject to strict regulatory oversight. In addition, Wespath staff closely monitors the investment assets not in custody with BNY Mellon.

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Why does Wespath continue to hold investments that are declining in value? Shouldn't it be selling investments that are incurring losses?

Wespath has a disciplined and long-term investment philosophy that focuses on building diversified and sustainable investment funds. We do not try to predict the near-term direction of the investment markets and we believe that past performance is not a predictor of future results. We have maintained this philosophy over many years and it has served our stakeholders well. Wespath’s funds consistently produce excellent results when compared to similar funds offered by the mutual fund industry.

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Who makes the investment decisions for Wespath's funds?

Wespath’s investment program is governed by an Investment Strategy Statement and Statement of Administrative Investment Policy, which is controlled by a board of directors and its Fiduciary Committee that operates as an investment committee. The Statement of Administrative Investment Policy establishes the asset allocation for each of the funds administered by Wespath and it delegates to management certain responsibilities for executing the investment program. Management engages the services of external investment managers to select specific investments for Wespath’s funds and carefully monitors their activities to ensure adherence to established guidelines. Management continuously measures and analyzes investment returns compared to corresponding performance benchmarks. Wespath seeks to establish lasting partnerships with its fund managers. Many of our relationships exceed 10 years. A complete list of Wespath's investment managers is maintained on this website.

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What type of costs do the funds incur and what are the expense ratios for each fund?

Wespath incurs costs for investment management, bank custody and fund administration. For expense ratios, please refer to the specific fund in the Investment Funds Description.

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What is a benchmark and why is it important for evaluating investment performance?

A benchmark is simply a standard used for comparison purposes in evaluating the performance of Wespath's investment managers. All of the Wespath's managers are assigned a benchmark by the Investment staff based on the types of securities in which the managers invest and their respective investment styles. Examples of benchmarks include popular market indices such as the S&P 500 (for U.S. large-capitalization public equities) or the Barclays U.S. Universal (for U.S. fixed income securities.) Over time the Investment staff measures each manager's actual performance against the performance of the benchmark to ascertain the quality of investment decisions that managers are making and whether the manager is adhering to his or her advertised investment style. Benchmarking is just one of the many tools that the Investment staff uses to regularly assess whether a manager should be retained or replaced.

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What are the reasons that a fund will perform better or worse than its assigned benchmark?

When Wespath engages the services of an investment manager, it will select a benchmark that best corresponds to the manager's investment strategy. The manager is expected to produce investment results that surpass the benchmark over a given market cycle, usually three to five years. The reason a manager's performance may differ from the benchmark is that the manager often chooses a portfolio of securities which differs from the composition of the benchmark. This portfolio is based upon the manager's informed interpretation of factors, such as the future economic outlook and the relative strength of the underlying securities given the manager's projected economic scenario. Over a given measurement period, to the extent that a manager's investments are different from the benchmark, the manager will typically either underperform or outperform their benchmark. The Investment staff is constantly monitoring managers' performance. If a manager significantly underperforms his or her benchmark, the Investment staff may decide to change managers.

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What is LifeStage and what are the LifeStage funds?

The LifeStage Investment Management Service (LifeStage) is a managed account program that develops a customized target investment allocation for participants in this program. The allocation mix is based upon each participant's personal risk tolerance, age, and estimated retirement date. After determining your target investment fund allocation, LifeStage manages your account. As you age, or as market returns cause your fund allocations to fluctuate, LifeStage adjusts your allocation accordingly.

LifeStage automatically allocates and rebalances participant accounts balances among six funds: the Stable Value Fund (SVF), the Inflation Protection Fund (IPF), the Fixed Income Fund (FIF), the Extended Term Fixed Income Fund (ETFIF), the U.S. Equity Fund (USEF) and the International Equity Fund (IEF).

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What are Wespath's largest holdings?

Wespath's website includes a Fund Description page for each fund offered by Wespath. On each page you will find a section that details the Fund Holdings. You can read the overview provided or download a PDF of the complete Investment Funds Description which describes the funds in more detail. The Fund Description page for each stock fund lists the top 10 stock holdings. For the Fixed Income Fund, Stable Value Fund and Inflation Protection Fund, instead of listing the top 10 holdings, each page contains a diversification chart that illustrates the classification of assets in the fund. On the Multiple Asset Fund (MAF) description page, you can view the fund's asset allocation. Since MAF is comprised of the underlying equity and fixed income funds, you can examine the holdings in each allocation on the corresponding Fund Description page.

Additionally, you can access a complete listing of holdings for each fund by clicking on the links below:

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Does Wespath administer accounts for groups other than participants and plan sponsors?

Wespath primarily administers the retirement, health and welfare plans for clergy and lay members of The United Methodist Church. Individual participants can contribute to their United Methodist Personal Investment Plan (UMPIP) through payroll deductions or executing rollover transactions from outside IRA accounts. In addition to managing the investment of plan contributions, Wespath (through its Wespath Investment Management division) invests funds, such as endowments, for other organizations affiliated with The United Methodist Church.

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Can I get financial planning advice from Wespath?

We offer EY Financial Planning Services for qualified participants at no charge. EY's expert financial consultants can help you determine how to invest your account. For more information, see our EY Financial Planning Services page.

Participants also have the option of electing the LifeStage Investment Management Service to allocate UMPIP funds on their behalf. To learn more about this service, see our LifeStage Investment Management Services page.

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I am an investment manager looking to become a sub-advisor to Wespath. How do I contact Wespath's Investment Management department?

If you are an investment manager and would like to contact us about providing services as a sub-advisor to our funds, please e-mail us at InvestmentMail@wespath.org. Any investment manager inquiry received through other means will be directed to this e-mail address.

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Sustainable Investment

What is sustainable investment?

Sustainable investment integrates investment decision-making with ethical principles—in our case, the Social Principles of The United Methodist Church. As a signatory to the United Nations Principles for Responsible Investment, Wespath has pledged to consider the impact of environmental, social and governance factors when making investment decisions. As a responsible investor, Wespath also will invest in underserved communities through its Positive Social Purpose Lending Program. In addition, we engage in shareholder advocacy to effect positive corporate change on a variety of issues.

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Does sustainable investment mean lower returns?

No. While there is risk involved in any investment, there are many studies that conclude sustainable investing provides comparable—and in some cases, superior—results versus non-screened investing. There is no credible evidence to suggest that a properly administered sustainable investment program lags in performance or generates lower overall returns over the long term.

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How does Wespath invest sustainably?

Wespath employs ethical exclusions that generally exclude companies that derive 10% or more of their revenue from gambling or from the sale of alcohol, adult entertainment, tobacco, weapons and operating private prison facilities. For nuclear weapons the threshold is 3%.

In addition to portfolio screening, Wespath participates in active ownership by engaging companies directly to address social, environmental, and governance issues of concern. Wespath writes letters to companies seeking additional disclosure of important information, meets with companies to discuss issues and opportunities for improved corporate performance, and files shareholder resolutions which are voted on by all shareholders at a company's annual meeting.

Wespath also has a significant social impact investing program that promotes affordable housing and community development throughout the country, supports important community facilities like rehabilitation centers, and funds microfinance investments that improve the lives of people in developing countries around the world.

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Who determines the investment strategy of Wespath and who monitors it?

The Fiduciary Committee of the Board of Directors establishes the investment policy. The Wespath Investment Management division monitors adherence to this policy and to the Social Principles of The United Methodist Church. The UMC Principles Committee of the Board of Directors monitors the work of Wespath to ensure that the investment program is appropriately aligned with the Social Principles.

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How does Wespath engage companies on issues of concern?

Wespath utilizes several methods to communicate with corporations. Initially, Wespath writes or calls a company to raise an issue and learn about the policies and practices of the company. Depending upon the receptivity of the company, Wespath will either engage corporate executives in dialogue to improve policies and performance or will submit a shareholder resolution for consideration at the corporate annual meeting.

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What is a shareholder resolution?

A shareholder resolution is a proposal submitted by an owner of an equity security that calls upon a company or its board of directors to take a particular action. The resolution appears in the company's proxy materials and is subject to a vote of the shareholders at the company's annual meeting.

Almost all shareholder resolutions are advisory. A company is not obligated to implement a resolution even if it receives a majority of the shareholder vote. However, many companies will comply with resolutions that receive a large percentage of the vote.

The filing of shareholder resolutions is strictly regulated by the U.S. Securities and Exchange Commission (SEC). In general, resolutions may be filed by shareholders owning at least $2,000 in company stock for at least one year prior to the date of filing. These shares must continue to be owned through the date of the annual meeting. Other regulations, such as resolution length, what issues may be addressed, and filing deadline also apply.

Companies may challenge shareholder resolutions. If the challenge is upheld by the SEC, the resolution cannot appear on the proxy ballot.

Resolutions must receive a certain percentage of the total shareholder vote in order to be re-filed the following year. First-year resolutions must receive 3%, second-year resolutions 6%, and in subsequent years resolutions must receive 10% of the shareholder vote in order to be re-filed the next year.

The regulations pertaining to the filing of shareholder resolutions are found in the Code of Federal Regulations, Title 17, Section 240.14a-8.

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Are companies bound by shareholder votes?

Companies are not bound by law to abide by shareholder resolutions, even those receiving majority votes. However, a positive shareholder vote often becomes the starting point for constructive dialogue between investors and company management, and may lead to the implementation of the resolution.

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What happens when a shareholder resolution receives a majority vote?

A company’s board of directors is not obligated to implement shareholder resolutions that receive a majority vote. However, large votes in support of a resolution often compel a corporate board to take action aligned with what was asked in the resolution.

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How important are corporate engagements?

Much of the hard work of sustainable investing takes place through corporate engagements. More often than not, concerned shareholders will physically meet with company officials to discuss issues and share points-of-view. But engagement also may take place by phone, letter or e-mail. They are typically a series of discussions or communications taking place over an extended period of time, sometimes years.

A shareholder engagement and shareholder resolutions are closely connected. It is not uncommon for the filing of a shareholder resolution to be a catalyst for a company to begin serious dialogue with shareholders.

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What is portfolio screening?

Portfolio screening takes two forms:

Positive portfolio screening is the identification of companies that provide certain products and/or services that have a positive impact on society or companies that have respected environmental, social, and governance policies and business practices. Examples may include companies that produce renewable energy, such as wind farms or companies involved in organic farming.

Negative portfolio screening is the identification of companies that fail to meet certain standards, or are involved in certain negative endeavors, and are therefore excluded from purchase. Wespath employs negative screening within its investment funds. Based on The Book of Discipline and The Book of Resolutions, the board of directors has specified that companies that generally derive 10% or more of their revenue from gambling or from the sale of alcohol, pornography, tobacco, weapons or the operation of private prison facilities will be excluded from purchase. For nuclear weapons the threshold is 3%. Wespath engages the services of an independent investment research firm to help identify ineligible companies.

Wespath's holdings and ineligible lists—published quarterly—as well as our Ethical Exclusions Guidelines can be found on the Ethical Exclusions page.

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Why are certain companies excluded from investment?

Wespath screens investments based on specific guidelines established by the board of directors. These guidelines are rooted in the Social Principles and the more detailed Book of Resolutions of The United Methodist Church. Through these two documents, the Church holds positions on a number of contemporary social, political, and economic issues. For example, the Church's long-standing opposition to alcoholic beverages, tobacco products and gambling can be found in the Social Principles.

The Church has instructed all church boards and agencies to "make a conscious effort to invest in institutions, companies, corporations, or funds whose practices are consistent with the goals outlined in the Social Principles..." and "to avoid investments that appear likely, directly or indirectly, to support racial discrimination, violation of human rights, sweatshop or forced labor, gambling, or the production of nuclear armaments, alcoholic beverages or tobacco, or companies dealing in pornography." (¶716, The Book of Discipline 2004.) Based on these provisions and the Church's Social Principles, Wespath's board of directors determines the specific guidelines around portfolio screening.

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What is the Wespath Failed/Ineligible List?

The ineligible list is comprised of companies that have failed one or more of Wespath's screening criteria. Wespath only screens those companies that our investment managers request permission to purchase. Wespath does not attempt to identify the entire universe of restricted companies that would violate our investing guidelines. It is possible that a company heavily involved in a restricted industry is not currently on our ineligible list simply because none of our investment managers have expressed an interest in purchasing a security of that company.

A company that fails our screening process is not approved for purchase and is placed on Wespath's ineligible list. In some instances, a company may be excluded from Wespath's funds even if it does not fail any individual screen. This generally occurs when a company is involved in more than one restricted industry, but passes each separate screen. In these cases, the combined revenue from each restricted sector is considered when making a decision.

The list is generated by the continuous requests of our investment managers, so companies may be added to the list at any time in the calendar year. It is reviewed annually to ascertain if any significant changes have occurred in the operations of the companies on the list. It is possible for a company to be removed from the ineligible list if revenue from a restricted activity declines below the 10% threshold (3% for nuclear weapons).

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What is proxy voting, and why is it important?

Every publicly traded company holds an annual meeting where management presents a ballot of several issues subject to a shareholder vote. Shareholders who attend the annual meeting may vote in person during the meeting, but most shareholders vote by proxy—either electronically or by mail.

Proxy ballots typically include the election of directors, ratification of auditors, executive compensation and other corporate governance issues. Shareholders can also place issues on the company's ballot, called shareholder proposals. Shareholder proposals can address corporate governance or social issues—such as reporting on the environment or labor standards—and they are usually sponsored by institutional investors like Wespath.

Wespath typically votes proxies for all of the companies in which it invests, totaling approximately 2,500 U.S. and 450 international company meetings every year. Since each ballot may contain many issues, this translates into more than 10,000 votes cast each year. Wespath votes its proxies actively, meaning that all issues are evaluated and voted according to the Social Principles, established proxy voting guidelines and best corporate governance practices.

Proxy voting is one important way for all shareholders to exercise their rights of ownership and to communicate their interests to company management and corporate boards of directors.

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What are the requirements for filing a shareholder resolution?

The Securities and Exchange Commission (SEC) oversees the shareholder resolution filing process. In order to file a resolution, a shareholder must own the equity security for at least one year prior to submitting the resolution to the company. A single filer or co-filers must own at least $2,000 worth of equity. Resolutions may request information from companies or request a change in company practices. Companies may also challenge the resolution with the SEC on technical grounds. A resolution must fulfill the requirements of the SEC and overcome the corporation's objections in order to be placed on the company ballot.

If a proposal receives at least 3% of the shareholder vote in the first year, it may be resubmitted the following year. It is then necessary for a proposal to receive at least 6% in the second year, and 10% to be resubmitted in the third year.

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How does Wespath apply its Socially Responsible Investing screens?

All funds are subject to the investment guidelines established by the Fiduciary Committee of Wespath's Board of Directors. The holdings in the Equity Social Values Plus Fund are required to meet additional social guidelines. As new asset classes are identified and included in our portfolio, we develop new policies and criteria as needed to evaluate our investments with respect to the Church's Social Principles.

We continually assess our ethical exclusions and research tools to ensure the highest level of compliance. Research is conducted by in-house staff using a variety of tools and the most current information available for both domestic and international markets.

The review process begins with a request from one of our investment managers. Each manager has a mandate for investing its allocation of funds. In accordance with that strategy, the portfolio manager will develop a selection of potential companies in which to invest. Each company is reviewed individually and a decision is made to approve the request or declare the company's stock ineligible for purchase.

Even with the existence of specific guidelines, portfolio screening is never a simple process. We must often address questions that the guidelines do not directly discuss. It would be difficult to create a policy that takes into account every possible set of circumstances that can occur in the corporate world today. We have established practices to assist us in our efforts regardless of the issues at hand:

  • Obtain the most reliable and timely data available.
  • Define and classify key terms within industries.
  • Apply our policies consistently and fairly throughout our funds.
  • Employ discretion when necessary to adhere to the spirit of the investment guidelines.
  • Seek the opinion of the Board of Directors when appropriate.

We always reserve the right to decline ownership in the stock of any company whose actions or activities are not compatible with the values or beliefs of the denomination.

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Center for Health

What is the HIPAA Privacy Rule?

HIPAA is the Health Insurance Portability and Accountability Act, a Federal Law passed by Congress in 1996. One of the provisions of HIPAA is the Privacy Rule, enacted in order to protect your privacy when it comes to your "protected health information" (also called "PHI"). The HIPAA Privacy Rule went into effect on April 14, 2003. The Privacy Rule gives specific requirements and rules that health insurance organizations (including HealthFlex), health care providers and health care clearing houses must follow to protect your PHI.

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What is "protected health information" (PHI)?

Protected health information, or PHI, is any information that can identify you that is used or held by a health insurance organization or health care provider. PHI includes such information as:

  • Name
  • Address
  • Phone number
  • Birth date
  • E-mail address
  • Social Security number
  • Admission or discharge date

PHI also includes medical data such as diagnoses and medications taken (if it identifies you). The HIPAA Privacy Rule has significantly changed how Wespath Benefits and Investments and the health care industry are allowed to deal with participants, spouses, family and others.

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What is COBRA continuation health coverage?

Congress passed the landmark Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefit provisions in 1986.  The law amends the Employee Retirement Income Security Act, the Internal Revenue Code and the Public Health Service Act to provide continuation of group health coverage that otherwise might be terminated.

COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available when coverage is lost due to certain specific events. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. It is ordinarily less expensive, though, than individual health coverage.

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When I attempt to register with WebMD, why do I get the message "Social Security Number already used?"

If you try registering and receive the message "Social Security Number already used," it is likely that you have already registered as a WebMD user. Please click the "Forgot Your Username or Password?" link beneath the login and choose from the options provided to retrieve your username and/or password.

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When can I make my HealthFlex annual elections?

Every year in November, participants can make their annual HealthFlex elections online. Exact dates will be announced closer to the determined election period. Shortly after the election period ends, you will receive a confirmation of your benefit elections in the mail.

Look for the HealthFlex Annual Election packet to arrive in the mail in early November. The packet highlights HealthFlex enhancements and programs designed to help you lead a healthier lifestyle.

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Do retirees get HealthFlex benefits?

The individual HealthFlex plan sponsor determines if retirees are covered, what coverage they will have, what premiums they will pay, etc. If you are considering retirement, please check with your conference or plan sponsor to determine what your health benefits will be upon retirement.

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Contact

How do I contact Wespath?

You can contact Wespath a number of ways:

Phone: 1-800-851-2201

You can browse a list of prompts to help guide you to the correct department.

E-mail: Web Contact Form

Directing your question to the right department will allow us to better serve your needs:

  • Select Retirement Benefits Team for questions or information regarding your retirement account. 
  • Select Health Benefits Team for questions or information regarding HealthFlex, WebMD or medical claims.
  • If you have recently moved or are updating your address, please be sure to include your previous address to expedite your request.

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Qualified Domestic Relations Order

What are some commonly asked questions regarding marital litigation and the division of retirement benefits pursuant to a Qualified Domestic Relations Order (QDRO).

Click here to read a FAQ document on marital litigation, divorce and the division of retirement benefits pursuant to a QDRO.

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TIPS

What are TIPS?

TIPS are notes and bonds issued by the U.S. Treasury. These securities have a fixed coupon (interest rate) and mature on a specified date in the future.

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What two concepts are most important to the future investment performance of TIPS?

1. Inflation.
2. The "real" rate of return (i.e., the portion of the investment return that investors require above the inflation rate).

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What is inflation?

Inflation is defined as an economic environment with rising prices. Inflation can erode consumers’ purchasing power by making goods more costly and can negatively impact the effect of your investment returns if the investment does not appreciate enough to keep up with inflation.

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How do we track inflation?

In the United States, the key economic bellwether for tracking inflation is the Consumer Price Index (C.P.I.), which is published monthly by the Federal Government Bureau of Labor Statistics.

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What are real interest rates?

The real interest rate is the interest earned after inflation is taken into consideration. For example, if an investment earns a nominal interest rate of 5% and inflation is 3%, then the real interest rate earned on the investment is 2%.

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What is a nominal interest rate?

The nominal rate is the actual interest rate paid on an investment. For example, consider a U.S. Savings bond with a stated interest rate of 5%. This rate is considered the nominal rate. It is expected (but not guaranteed) to compensate the holder of the savings bond for inflation plus an additional return (i.e., “real” yield).

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How do TIPS work?

The U.S. Government issues a TIPS bond with a face value of $1,000 per bond and a stated real interest rate. Twice a year, the government pays interest based on the real interest rate and increases the value of the bond based on the change in the CPI. If there is a drop in the CPI, the government will lower the price of the bond but will never lower the price below the face value of $1,000.

Example of how the principal or face value of a Treasury Inflation Protected Security adjusts with the change in inflation or Consumer Price Index:

Year Fae Value CPI Value Adjust New Value Real Rate Interest Paid
1 $1000.00 2.2% $22.00 $1022.00 3.5% $35.77
2 $1022.00 0.0% $0.00 $1022.00 3.5% $35.77
3 $1022.00 -0.4% -$4.09 $1017.91 3.5% $35.63

 

 

 

 

 

In summary, the principal or face value of TIPS fluctuates with the change in the inflation rate but the principal value will never be less than original principal value at the time the U.S. Government issued the security.

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Under what conditions could the value of TIPS decline?

Generally, two conditions could cause the value of TIPS to decline.

  1. A period of deflation in the United States. While the face value of a TIPS bond will never fall below $1,000, should the United States experience deflation (declining prices) after a period of inflation (rising prices), the face value could decline until it reaches $1,000. As demonstrated in the table above, prices declined in year three. Accordingly, the face value of the bond fell in value based on the decline of the CPI for that year.
  2. Investor real interest rate expectations rise. At the time of purchase, one can calculate the real interest rate expectation priced into the value of the bond. Market forces set real interest rates based on supply and demand. Market dynamics are constantly changing and if supply and demand patterns change in a manner that results in an increase of real interest rate expectations, the price of a TIPS bond will decline.

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