Wespath FAQs: General Conference 2019

 

Wespath FAQs: General Conference 2019

Latest Update: February 19, 2019

General Conference 2019 Update

In the weeks following General Conference 2019, Wespath will analyze the outcome, determine any necessary next steps, and communicate potential benefits-related impacts to UMC stakeholders. Please continue to monitor this website for updates.


The Commission on a Way Forward sought additional expertise from Wespath regarding the potential pension impacts of the Commission’s three proposals to the 2019 Special General Conference. Wespath provided information and analysis about how various scenarios under consideration might impact clergy pensions (U.S. plans), as well as related effects on local churches and annual conferences. Wespath provided detailed analyses in “Appendix 4 – Wespath Resource to the Commission’s Report,” (pages 157-163 of the Advance Daily Christian Advocate).

Wespath is prepared to serve the Church in whatever form it takes in the future under any scenario. The following FAQs provide additional information. We will update this page as more information becomes available.

Context

  • Information in Appendix 4 and FAQs below applies to plans for U.S. clergy.

  • Annual conferences are the “plan sponsors” of the UMC pension plans, and are legally responsible for paying the benefits promised to clergy (BOD ¶1507).
  • Pension liabilities are a long-term responsibility under current defined benefit (DB) plans. Annual conferences have pension liabilities for currently active clergy through approximately 2090 (based on actuarial projects). See “Long Tail of Pension Payments” illustration.
  • The annual conference needs to receive assets from the local church to offset the liabilities—related to clergy service in that local church and all its local churches—that remain with the annual conference after the local church departure.

General Questions

For Clergy

For Local Churches

For Annual Conferences

For Lay Employees at UMC-Related Employers

Additional Considerations


I’m hearing rumors and reading things in blogs and social media about the possible impacts of the 2019 General Conference and the Way Forward plans on pension and other benefits. How do I find out if what I’m hearing and reading is true?

Wespath seeks to provide unbiased and accurate information about the UMC benefit plans, and in particular about the effects that the Way Forward plans and the 2019 General Conference may have on those plans. Wespath has published these FAQs to help participants and Church stakeholders understand these types of questions, and we update the FAQs regularly. You can also send your questions to Lisa Drew at Wespath at ldrew@wespath.org.

Return to top.


Does Wespath have a preferred plan based on proposals under consideration?

No. Wespath is prepared to make whatever changes are required to continue serving the Church in whatever form it takes after General Conference 2019. We will continue our mission of caring for those who serve and administering benefit plans on behalf of The United Methodist Church, as directed in The Book of Discipline.

Return to top.


What does the term “long tail of pension payments” (or “long tail of liability”) mean?

Wespath uses this term to describe the long-term pension obligation (monthly payments) that are promised to retired clergy and their beneficiaries through the UMC’s defined benefit plans, including some plans that have been “closed” to new participants. For example, the Ministerial Pension Plan (MPP, for service 1982 through 2006) is projected to pay out annuities until about 2090. The annual conferences remain legally responsible for paying those benefits if additional funding is needed. Nearly 60,000 participants are covered under MPP.

Return to top.


How does the connectional structure of The United Methodist Church influence retirement benefits?

“Connection” is core to the UMC. The connectional nature of our denomination means that departure by one local church affects other churches. An annual conference’s pension liability and funding are aggregated for all of its clergy and local churches, collectively. Moreover, under the UMC pension plans, the annual conferences promise to support one another. It’s something like a “Three Musketeers clause”—all for one and one for all. If any annual conference for some reason were unable to fund pension benefit payments when needed, the other annual conferences would make up the difference. Defined contribution (DC) plans like UMPIP are much less connectional in nature, given that they are fully funded at the outset. Market, longevity and demographic risks for DC plans are borne by participants.

Return to top.


Where can I read the Advanced Daily Christian Advocate (ADCA) in different languages?

The ADCA is available in four languages here.

Return to top.


If a clergyperson leaves the UMC, does he or she lose accrued pension benefits?

No. Clergy who leave the UMC will not lose retirement benefits they have already earned to date for their service in the UMC (up to the date of terminating their UMC or annual conference relationship). This applies regardless of whether a clergyperson joins another Methodist denomination, joins a non-Methodist denomination, or relinquishes any church affiliation altogether.

However, a clergyperson who leaves the UMC would not earn future benefits under the current pension plan and may not receive cost-of-living benefit increases. In effect, the clergyperson’s defined benefit amount would be “frozen in time” based on the date of departure from the UMC.

Return to top.


What would happen to accrued pension benefits for a clergyperson who leaves the UMC under the proposals in the Report from the Commission on a Way Forward?

If petition 90017 (ADCA pg. 168) is approved, all accrued benefits under the Clergy Retirement Security Program (CRSP), including those under the Pre-82 portion of the plan, would be converted into an account balance (dollar amount) equivalent and transferred to the United Methodist Personal Investment Plan (UMPIP, a voluntary defined contribution plan maintained by Wespath).

  • For pension benefits from the portion of CRSP called the Ministerial Pension Plan (MPP, for years of UMC service 1982-2006):
    • For active clergy, these benefits are account balances that do not need to be converted. The account balances would be transferred to UMPIP, similar to a rollover.
  • For pension benefits from the Pre-82 Plan (for years of UMC service prior to 1982):
    • Accrued Pre-82 benefits would be converted into an account balance (dollar amount) equivalent and transferred to UMPIP.
  • For pension benefits from the CRSP defined benefit (CRSP DB, for years of UMC service January 2007 until date of termination/relationship change):
    • DB benefits would be “frozen in time” based on the date of the clergyperson’s departure or a date specified by the General Conference.
    • Frozen CRSP DB benefits would be converted into an account balance and transferred to UMPIP.
  • For pension benefits from the CRSP defined contribution (CRSP DC, for years of UMC service January 2006 until date of termination/relationship change):
    • CRSP DC account balances would be transferred to UMPIP.

All of the amounts transferred to UMPIP as described above would be invested in Wespath funds according to the direction of the departing clergyperson—similar to the clergyperson’s personal contributions to UMPIP. These amounts could provide opportunities for growth that do not exist in pension benefits (depending on market conditions and fund returns), but no longer guarantee lifetime income.

DC benefits are portable, no matter where a clergyperson serves or if the pastor leaves ministry altogether.

Please note: The Commission on a Way Forward recommends petition 90017 be approved by the General Conference in the event that any of the three plans, or no plan, prevails. See page 18 of the COWF Report.

Return to top.


What happens to accrued pension benefits for a clergyperson who leaves the UMC today?

  • Accrued benefits under the Clergy Retirement Security Program (CRSP) cease, and are essentially frozen at the compensation level at the time of termination.
  • Accrued benefits under the Pre-82 portion of CRSP remain vested and secure; however, benefit increases are frozen at the time of termination.
  • Account balances under the Ministerial Pension Plan (MPP) portion of the plan remain vested and secure, and a portion would be converted to a lifetime annuity at age 62.

Clergy whose conference relationship terminated under Discipline ¶360.2, Withdrawal from the Ordained Ministerial Office, may elect to have the accrued defined benefit (DB) part of CRSP service since 2007 converted (actuarial equivalence) to an account balance and transferred to their CRSP defined contribution (DC) account.

Return to top.


Can clergy who choose to exit the UMC keep their retirement account at Wespath—or would they be required to withdraw their account balance and invest elsewhere?

Today, clergy who terminate or change their relationship with their current annual conference or with the UMC connection may choose to keep their retirement account at Wespath; they would not be required to withdraw their account balance and invest elsewhere.

This would also be true under any of the proposals in the report from the Commission on a Way Forward. For such clergy, any account balances transferred from CRSP to UMPIP, including converted pension benefits, could remain invested with Wespath. Wespath serves many former UMC employees, survivors and beneficiaries.

Return to top.


If clergy exit the UMC and become eligible for a distribution from UMPIP, are there any disadvantages to rolling the balance over to an IRA or other retirement plan?

Rolling retirement assets out of a Wespath-administered plan to an IRA or other retirement plan could result in the loss of a clergyperson’s ability to benefit from the housing allowance exclusion from gross taxable income for distributions. Clergy may want to consult a tax advisor for more information.

Return to top.


Is it true that if the Traditional Plan is approved, my pension will automatically be cut?

No. Neither your pension, nor any retirement account balances, will be reduced by enactment of any of the three Commission plans as they are written.

Wespath worked closely with the Commission to help mitigate any risks to retirement benefits during the analysis of the Way Forward options. The Commission recommends (page 133-134 of the ADCA) that an amendment to the clergy pension plan (CRSP) (Petition 90017page 168 of the ADCA) be enacted with any of the three Commission plans that might be approved by the 2019 General Conference, or in the event that no plan is approved.

  • For those who leave the UMC, this petition recommends converting the participant’s accrued pension benefits into an actuarially equivalent account balance and transferring to a defined contribution plan (UMPIP) that offers future opportunities for investment growth (based on market conditions and fund returns).

Return to top.


If a clergyperson exits the UMC, can he or she continue contributing to UMPIP?

No. Clergy must remain active with an annual conference, church or other UMC-associated entity that sponsors UMPIP in order to continue contributing. If a clergyperson exits the UMC, he or she would not be able to continue contributing unless his or her new employer is sufficiently associated with the UMC (a facts and circumstances analysis based on IRS guidance) to sponsor UMPIP.

Return to top.


How are individual clergy pension benefits determined?

Each clergyperson has a unique combination of benefits based on one’s specific years of service and the plan designs in place at that time of service.

Learn more about UMC retirement plans here.

Return to top.


Will monthly pension benefits being paid to a clergyperson be reduced in the event of a UMC restructure? What about accrued benefits not yet in payment?

The chance that pension payments would be reduced is very remote.

Pension benefits already earned (accrued) to date through defined benefit (DB) retirement plans are “vested” and generally secure. In the event of a major disruption the UMC, DB plans may be frozen, which means that future accruals would cease. Clergy who depart from the UMC (i.e., terminate their UMC annual conference relationship) would have a change in the form of their benefit*. Departing clergy would not forfeit benefits they have accrued; however, the DB accruals (i.e., the promise of future fixed payments for life in retirement) would be converted into an equivalent account balance (a dollar amount that belongs to the clergyperson and grows or shrinks based on market fluctuations) in the United Methodist Personal Investment Plan (UMPIP).

Local churches that exit must pay a fair share payment (also called “withdrawal liability”) to the annual conference in order to help ensure that pensions being paid can be preserved.

* Provisions to convert DB accruals to an account balance for clergy who exit the UMC are described under the Commission’s One Church Plan (pages 25-26 of Judicial Council Docket—Exhibit A). However, the Commission on a Way Forward and the Council of Bishops have recommended adopting this policy regardless of which plan is approved by General Conference 2019.

Return to top.


What about other clergy benefits?

Most of Wespath’s focus leading up to General Conference 2019 has been on clergy pension benefits because of the long-term liabilities among U.S. annual conferences and the shared responsibility for payments.

However, potential restructure of the UMC (including but not limited to potential exit of clergy, local churches or annual conferences) would also impact other clergy benefits administered through Wespath. For example, annual conferences would continue to be liable for health benefits for active and retired clergy.

Return to top.


If a clergyperson is currently receiving disability benefits from the Comprehensive Protection Plan (CPP), will leaving the UMC cause those disability benefits to stop? What if the clergyperson’s local church or annual conference leaves the UMC?

Replacement income that is already being paid from CPP due to disability will continue—even if the clergyperson leaves the UMC or his/her local church or annual conference exits.

  • Once those benefits begin, they will continue for as long as the recipient remains disabled (as defined in CPP). (Please note: Any retirement plan contributions made by CPP during disability would cease when a clergyperson leaves the UMC. Also, there are other events that may cause disability replacement income to end, such as failing to verify continued disability, reaching a certain age, etc. )

Return to top.


If an active clergyperson leaves the UMC, will he or she remain eligible for death benefits from CPP?

No. An active clergyperson who leaves the UMC does not remain eligible for CPP death benefits. (However, if a clergyperson had already retired and qualified for retiree death benefits before leaving the UMC, the clergyperson would remain eligible for CPP retiree death benefits.)

Return to top.


If an active clergyperson’s local church or annual conference leaves the UMC, will he or she remain eligible for death benefits from CPP?

No. The clergyperson would lose his or her eligibility for CPP death benefits. (Again, if a clergyperson had retired and qualified for retiree death benefits before the church or conference left the UMC, as described in the Q&apm;A above, he or she would remain eligible for retiree death benefits).

However, under a provision of Petition 90041 (part of the Traditional Plan), an annual conference that leaves the UMC to become a self-governing Methodist church could negotiate with Wespath to continue to sponsor a welfare program for its clergy, which may thereby preserve death benefits eligibility for some clergy.

Return to top.


Do any of the Commission on a Way Forward plans impact pensions of currently retired clergy?

Generally no. Retirement benefits for already retired clergy are secure. The pension-related provisions in the Commission’s proposals seek to maintain that security.

Return to top.


Do any of these pension considerations apply to clergy in the Central Conferences?

No. Clergy in most of the Central Conferences receive retirement benefits through the Central Conference Pensions (CCP) program. Although Wespath assists with payment administration, CCP benefits generally are administered by each country and therefore do not have connectional liabilities.

These FAQs apply to U.S. clergy, local churches and annual conferences. Of the three proposals submitted by the Commission on a Way Forward, only the Connectional Conference Plan would directly impact conferences outside of the U.S. (i.e., in the Connectional Conference Plan, a central conference could choose to align with the Progressive, Traditional or Unity Connectional Conference—based on theology rather than geography).

Return to top.


Why would an exiting local church be expected to pay monies to the annual conference to cover unfunded pension obligations?

The connectional nature of The United Methodist Church means that departure by one church affects the whole Connection. An exiting church would leave some portion of its long-term pension obligations to the annual conference from which it is departing. This means that the exiting church in effect would leave behind its share of market and longevity risks related to retirees and survivors receiving benefits to the other local churches in its annual conference and, to some extent, to other annual conferences and their local churches.

By paying its “fair share” of the annual conference’s aggregate unfunded pension liability as part of its exit, the exiting local church provides to the conference funding to compensate for taking on more of the responsibility involved in the promise of long-term pension payments for active and retired clergy and their surviving beneficiaries. This “fair share” payment also compensates the annual conference for assuming what would have been that church’s risks (investment, longevity and mortality risks) for long-term clergy benefits now that the church will no longer be part of the annual conference.

Return to top.


I’ve heard rumors about the exact amount of money a local church would need to pay if it leaves the UMC or moves to a theology-based conference. Are these true?

No. The amount of money that any local church would be expected to pay to its annual conference varies from church to church and annual conference to annual conference. This amount would be decided upon between the annual conference and the local church. Wespath may provide financial analysis/input to the conference regarding pension liability—but the annual conference ultimately determines each church’s “fair share.”

Return to top.


Who calculates the unfunded pension obligation that an exiting church would owe to the annual conference?

The annual conference would determine the amount that an exiting church owes for unfunded pension liabilities. Similarly, the annual conference currently determines the amount each UMC local church pays to fund pension liabilities. As the general agency that administers clergy benefits and manages benefits-related funds, Wespath would provide actuarial guidance to help conferences make appropriate calculations.

Return to top.


What role would Wespath have in determining pro rata unfunded pension obligations?

Wespath would calculate the total unfunded liability for pensions and annuities being paid and for benefits earned as of that date for the entire annual conference. But the conference would then decide how to allocate a proportional share of that liability to a local church.

Return to top.


If a local church exits the UMC, how would that church’s pro rata share of unfunded pension obligations be calculated?

The individual church’s share of unfunded pension obligations would be determined by its annual conference. Conferences have flexibility in how they might calculate this. Some potential options that conferences might use to calculate individual church obligations include:

  • The local church’s apportionment decimal
  • The local church’s income as a percent of income from all churches in that conference
  • The pastor’s compensation as a percent of total compensation for all pastors in the conference
  • Other methodologies as determined by the annual conference

Return to top.


Does Wespath have any suggestions on how annual conferences might calculate an exiting church’s “share” of possible future pension funding?

Any final recommendations would be made after General Conference 2019. In the meantime, for discussion purposes related to General Conference 2019 considerations, Wespath has suggested this two-step approach for calculating an exiting church’s “fair share”:

  1. The conference would obtain from Wespath the additional dollar amount needed to fully fund all of the conference’s retirement plan components using actuarial assumptions similar to what a commercial insurer would use (i.e., actuarial assumptions based on a “market basis” like corporate pension plans use), including funding for: Pre-82 Plan, Ministerial Pension Plan (MPP) and Clergy Retirement Security Program (CRSP).
  2. The conference would determine the departing church’s pro rata share of this amount based on that church’s financial capacity as compared to other churches in the conference. This might be based on apportionment decimal or other methods described above.

Return to top.


Is the exiting church’s “pro rata fair share” payment based on any specific retirement plan?

No. The local church’s pro rata fair share (also called “withdrawal liability”) will be based on total liability for all defined benefit (DB) retirement plans [Pre-82 Plan, annuities from the Ministerial Pension Plan (MPP), and the DB portion of Clergy Retirement Security Program (CRSP)].

Return to top.


What is the difference between “market factor” and “funding factor”—and how does that affect an exiting church’s “pro rata fair share” payment (also called “withdrawal liability”) to cover unfunded pension liabilities?

  • Pension plan liabilities on a long-term funding basis are calculated using a discount rate* that reflects the long-term, average expected earnings of the plan assets. All annual conferences currently make contributions on a funding basis for MPP annuities and CRSP DB.
  • Pension plan liabilities on a market basis are calculated at a discount rate that reflects what an insurer or other outside party would use in pricing the liabilities if taking over the responsibility for benefit payments from the plan sponsor (the conference, in this case).

Depending on current interest rates, market liabilities are typically higher than funding liabilities. This is because market-based discount rates are generally lower, reflecting more conservative assumptions about future earnings of plan assets. Using market-based rates helps minimize the financial risk that is transferred to the party taking over the long-term responsibility for benefit payments. Sometimes the difference between market basis and funding basis liability amounts are quite substantial.

*The discount rate is an interest rate used to calculate the present value (i.e., money needed to pay all benefit liabilities today) of expected future benefit payments (i.e., the plan liabilities). Generally speaking, the lower the discount rate, the greater the liabilities.

Return to top.


If a local church has dutifully paid 100% of its apportionments and pension payments over the years, why would it still be expected to pay an additional “fair share” if it leaves the annual conference or denomination?

Even though the local church has paid as expected for many years, the church still leaves behind a long-term financial risk when it exits. This is because an exiting church leaves behind what would have been its share of long-term liabilities (i.e., monies the church would have paid in future benefits to retired clergy). The annual conference and the remaining local churches in that conference therefore assume the long-term financial risk for benefit payments. Long-term financial risk is affected by factors such as investment conditions and longevity (how long participants and surviving spouses/beneficiaries will receive promised payments).

Return to top.


If a local church exits from a conference whose plans are currently “fully funded,” would the church be excused from paying an additional “fair share” withdrawal liability?

If the conference’s plans are fully funded on a market basis (which would be a very rare circumstance), there would be no withdrawal liability. Otherwise, the exiting local church should still pay its share to the annual conference of the total needed to be fully funded on a market basis. Even if the conference plans are fully funded on a long-term basis at the time of exit, there is no guarantee that they will remain fully funded over the next 10 to 50 years or beyond because of fluctuations in investment markets, mortality, etc. over the long term.

Return to top.


Where would exit payments be held?

Based on a petition being submitted to General Conference 2019*, a local church’s exit payment (“withdrawal liability”) would be paid to the annual conference. The Conference Board of Pensions or other decision-making body in the annual conference would determine the ultimate use of these assets, but would be encouraged to use them for pension and benefits purposes.

* Proposed new subparagraph 23 to BOD¶1504

Return to top.


If a local church left the UMC any time before General Conference 2019 (including in prior years), would they have had to pay their “fair share” to cover unfunded pension liabilities?

It depends. Because the UMC is “connectional,” a departure by one local church affects others. So a local church that exits The United Methodist Church connection at any time might be expected to pay its fair share of unfunded pension liability to the annual conference from which it departs.

Annual conferences may have sought these contributions in the past. A proposal in the One Church Plan, petition 90016—Pension Liabilities (ADCA pg. 168), would amend language in the Discipline to reflect this expectation.

Return to top.


If a local church exits The United Methodist Church, would it face costs other than pension liabilities?

Yes, the annual conference may determine that there are additional financial considerations for a local church that leaves the UMC. Other financial considerations might include:

  • Retiree medical liabilities
  • Non-benefit financial obligations to the annual conference
  • Repayment of grants or loans
  • Apportionment costs
  • Other expenses, as determined by the annual conference or general church

Wespath’s proposals and analyses address only the local church’s pension liabilities. Any additional costs for benefits, apportionments, etc. would be determined by the annual conference and local church.

Return to top.


What is the “trust clause” and why does it matter?

The “trust clause” is a paragraph in The Book of Discipline (¶2501) that applies to all properties of United Methodist local churches, agencies and institutions. Under the trust clause, all such property is held in trust for the benefit of the entire denomination, with ownership and usage being subject to the Discipline. Property can be released from the trust only to the extent authority is given by the Discipline. Today, if a local church seeks to exit the UMC, the trust clause would apply to any property held by the church, even if the title is in the name of such church.

The Commission on a Way Forward proposes adding a new subparagraph 23 to The Book of Discipline ¶1504 that would direct the local church or charge to pay withdrawal liabilities for unfunded pension obligations. Payment would be made to the annual conference.

Return to top.


What if an entire annual conference exits from The United Methodist Church? What would happen to pension payments and liabilities?

While Wespath manages the funds and administers distributions to clergy, the annual conferences are actually the “plan sponsors” for the UMC defined benefit pension plans under the terms of the plans and therefore are legally responsible for funding the plans. With the UMC’s connectional nature, annual conferences promise to support one another in a “one for all, all for one” manner. Therefore, if one annual conference for some reason could not fund pension benefit payments when needed, the other annual conferences would make up the difference.

There is currently no method in the Discipline for an entire annual conference to depart. A process for annual conference departure is described in the Traditional Plan petitions (pg. 187 of the ADCA).

Appendix 4 to the COWF Report explains how this might impact pension obligations for an annual conferences that departs and pension benefits for the annual conference’s clergy (“Appendix 4 – Wespath Resource to the Commission’s Report,” (pages 157-163 of the Advance Daily Christian Advocate).

Return to top.


What if the Traditional Plan prevails and an entire annual conference does leave The United Methodist Church? What would happen to clergy benefits and annual conference liabilities?

While Wespath manages the funds and administers distributions to clergy, annual conferences are the “plan sponsors” for the UMC defined benefit pension plans. That means that annual conferences are legally responsible for funding the plans. With the UMC’s connectional nature, through the pension plan as currently written, annual conferences promise to support one another in a “one for all, all for one” manner. Therefore, if one annual conference for some reason could not fund pension benefit payments when needed, the other annual conferences would make up the difference.

There is currently no avenue in the Discipline for an entire annual conference to “exit.” A process for annual conference departure is described in the Traditional Plan petitions (pg. 187 of the ADCA). And the Judicial Council upheld this proposal for an annual conference to leave the Connection. But, the Judicial Council ruled that an annual conference could not be forced out. (See Judicial Council Decision No. 1366.)

Appendix 4 to the COWF Report explains how an annual conference exit might impact the obligations of annual conferences that depart and pension benefits for the annual conferences’ clergy (pages 91-92 of the COWF Report).

Generally, an annual conference that departs would have its portion of the pension plan frozen. Traditional pension benefits for the annual conference’s clergy would cease increasing in the future.

  • However, benefits earned to that date would remain secure, supported by the former annual conference and maintained by Wespath.
  • The former annual conference would provide retirement benefits of some sort for its clergy for ongoing service—likely a defined contribution (account balance) plan, through Wespath or another provider. These benefits would be designed to reflect the conference’s new capacity and polity.
  • The former annual conference would be responsible for the promised pension benefits, but would no longer realize the “connectionalism” of other annual conferences’ support if it could not satisfy its promises. As long as the former annual conference supported the frozen pension plan (making contributions when necessary, for example), the pension would be waiting for the clergy at retirement and would be combined with the individual’s new defined contribution retirement plan.

Moreover, it would be up to the former annual conference to determine whether other benefits, like retiree medical coverage, life insurance and other benefits for survivors, would still be provided to active and retired members of the former annual conference.

Return to top.


How would pension benefits be realigned and administered in the event of theology-based conferences (for example, such as under the Connectional Conference Plan)?

Under a proposal such as the Connectional Conference Plan (where every annual conference realigns based on theological beliefs rather than the current geographical alignments):

  • Local churches would leave the geographic-based conference to which they have historically belonged, but would become part of a UMC connectional conference—rather than leaving the UMC connection altogether.
  • Pension liabilities would remain the legal obligations of the annual conference, regardless of which connectional conference is chosen.
  • Wespath will develop methods to reassign pension liabilities associated with local churches that opt into another connectional conference.
  • Wespath proposes freezing the legacy pension plans, and moving quickly to a defined contribution/account-based pension plan (page 161 of ADCA).
    • For transfers of churches between conferences, proposed Discipline language (¶1506.7) calls for pension responsibilities related to clergy service at that charge to move to the successor conference. Under this scenario, the landing conference (i.e., the Traditional, Unity and Progressive Connectional Conferences) would each be responsible for pension liabilities for clergy in its charge.

Return to top.


If an annual conference realigns in one direction, but a few of its local churches choose a different direction—what happens to retirement assets and liabilities?

Under the Connectional Conference Plan, it is possible that most local churches in an area would move to one of the Connectional Conferences (for example, the Unity Conference), while a few churches in the annual conference choose a different Connectional Conference (for example, the Traditional Conference).

Although this scenario would create administrative complexity, Wespath has the clergy data, service records and expertise to successfully sort through such benefits realignments and appropriately redistribute pension assets and liabilities to accommodate new conference configurations.

Return to top.


Would the plans being considered by General Conference 2019 impact retirement benefits for lay employees?

Impact to lay employees would be far less eventful than their clergy counterparts. This is because retirement benefits for lay employees are generally provided through defined contribution (DC) plans, which provide individual accounts funded with immediate contributions. These accounts are portable and fully funded once contributions are made, so they do not involve long-term funding obligations. In addition, the retirement plans for lay are generally not connectional in nature, so the local church, annual conference, general agency or other UM employer do not carry shared responsibility for funding the plan.

Lay employees are typically covered through DC plans such as the United Methodist Personal Investment Plan (UMPIP), the Retirement Plan for General Agencies (RPGA) or the Horizon 401(k) Plan. More details about retirement plans are available at Wespath.org.

Return to top.


Does the “long tail of pension payments” graph in the Commission’s report apply to lay employees in the Connection?

Generally no. Pension payment liabilities shown are for U.S. clergy.

Most eligible lay employees at United Methodist local churches, annual conferences, general agencies or other UMC-related employers are covered by defined contribution (DC) plans, such as the United Methodist Personal Investment Plan (UMPIP), Retirement Plan for General Agencies (RPGA) and Horizon 401(k) Plan. DC plans offer account-based retirement benefits instead of promised lifetime monthly payments in retirement.

A small number of former general agency employees who are now retired may be receiving pension or annuity payments from legacy defined benefit plans. Those legacy plans are well-funded.

Return to top.


What is the “Wespath Appendix”?

The Wespath Appendix (Appendix) is Appendix 4 of the Report submitted to the 2019 Called General Conference by the Commission on a Way Forward (Commission). The Appendix explains potential pension impacts of various proposals (“models”) considered by the Commission.

The Appendix summarizes Wespath’s analyses of potential impacts of different Church scenarios, including insights on:

  • Long-term funding liabilities for local churches and annual conferences
  • Impact on individual clergy benefits
  • Long-term sustainability for plans and plan funding
  • Record-keeping and administrative complexities

Return to top.


Why did Wespath develop the Appendix?

While contemplating various models for the future of the Church, the Commission sought additional expertise relating to clergy pensions and the Church’s benefit plans.

Wespath Benefits and Investments (Wespath) is the administrator and record-keeper of the benefit plans for the UMC, and is the trustee and investment manager for plan assets—as defined and described in The Book of Discipline (¶1504).

The Commission and the Council of Bishops asked Wespath to provide information and analysis about how various scenarios under consideration might impact clergy pensions and have related effects on annual conferences and local churches.

Return to top.


Can Wespath serve conferences, churches or clergypersons who follow an avenue of exit from the UMC?

Yes. Wespath is authorized by The Book of Discipline and U.S. law to manage funds and offer services to church and nonprofit organizations that are related to, or share “common religious bonds and convictions” with, The United Methodist Church. Thus, Wespath can continue to serve such organizations as long as they continue to share such common religious bonds and convictions with the UMC. Clergypersons can continue to participate in Wespath-administered plans if they serve such organizations, and if those organizations choose to become plan sponsors of Wespath-administered plans.

Return to top.


How is Wespath preparing for the future?

  • Wespath has a “scenario planning” team analyzing the impact of various changes to UMC structure.
  • Wespath remains focused on assuring that the plans we manage and funds we invest remain sustainable for future generations. We are evaluating plan design changes to present to General Conference 2020 that we believe will help make our plans more sustainable over the long term.
  • Wespath is prepared to make necessary adjustments to continue serving the UMC in whatever form it takes following the Special General Conference 2019.
  • Wespath is well-positioned to continue fulfilling our mission of caring for those who serve the Church.

Return to top.


Are potential amendments being considered for retirement plan designs for the 2020 General Conference a result of potential changes to the Church during the 2019 General Conference, or membership attrition or other disruptions that might follow General Conference 2019?

Wespath believes that a changing society (globally and in the U.S.), along with potential disruptive changes to the structure and governance of the Church—including shifting demographics and declining size of the U.S. Church—necessitate a substantial change to the U.S. clergy retirement plan in the foreseeable future in order to reflect a more sustainable design. We believe a transition from a traditional pension to an account balance type plan would be more sustainable over the long term. This belief is based not only on Wespath’s analysis and scenario planning, but also in part on feedback received from many stakeholder groups within the Church, as part of a recent Wespath plan design study. Any disruptive changes to the Church during or as a result of the 2019 General Conference will accelerate the need for the transition.

Please note: Changes to the U.S. clergy retirement plan requires General Conference 2020 approval, and would impact future service as of the plan’s effective date (potentially January 1, 2023—to be determined by the General Conference 2020). Benefits for service prior to the new plan’s effective date would not be affected.

Return to top.


Assuming nothing changes at General Conference 2019 and The United Methodist Church continues in its current structure, would Wespath still propose a DC-only pension plan to General Conference 2020?

Yes. Wespath believes that a defined contribution (DC) plan design or similar account balance type plan will be more sustainable over the long term, due to the disruption that will result even from the General Conference 2019 making no changes to the current state, and also due to shifting demographics, the declining size of the U.S. Church and other factors.

A defined contribution/account balance type plan would help:

  • Protect conferences from decades-long pension obligations;
  • Allow portability for individuals who move between churches, conferences and other employers; and
  • Support greater freedom and flexibility for the denomination.

Please note: Changes to the U.S. clergy retirement plan require General Conference 2020 approval, and would impact future service as of the plan’s effective date (potentially January 1, 2023—to be determined by the General Conference 2020). Benefits for service prior to the new plan’s effective date would not be affected.

Return to top.



Submit a Question

Do you have an additional question for Wespath Benefits and Investments on how the scenarios under consideration might impact clergy pensions, as well as related effects on local churches and/or annual conferences? Please submit your question to Wespath.

 

 
close (X)