Most Recent Update—August 19, 2019
Questions on this webpage have been updated to reflect the results of General Conference 2019. Wespath continues to give thoughtful consideration to the decisions of the Special Session of the General Conference and the impact on pensions, benefits and liabilities funding. These FAQs are updated periodically.
Please direct any questions to [email protected].
The Special Session of the General Conference of The United Methodist Church (February 23-26, 2019 in St. Louis, Missouri) acted on a report from the Commission on a Way Forward, which was authorized to examine paragraphs in The Book of Discipline concerning human sexuality and to explore options to strengthen church unity. [More details and news stories related to General Conference 2019 are available on the UMC website: umc.org and on the UMC's General Conference 2019 webpage.]
The following FAQs provide information on two pension-related petitions that were submitted by the Commission on a Way Forward and approved by the General Conference, as well as additional information related to General Conference 2019 outcomes and potential impacts on clergy benefits.
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What are the two pension-related petitions that were approved at General Conference 2019?
Petition 90016 added ¶1504.23 to The Book of Discipline, which requires that local churches changing the nature of their connection to The United Methodist Church shall pay a proportional fair share of the annual conference's unfunded pension liability to the annual conference. This payment is designed to account for the investment, longevity and other risks that the local church is leaving with its conference.
Petition 90017 amended the Clergy Retirement Security Program (CRSP) for active clergy who leave the UMC by termination of their annual conference relationship. The vested accrued pension benefits of such clergy will be converted to an account balance. The conversion will use actuarial factors corresponding to those used when determining annual conference plan sponsor contributions to CRSP.
- The converted pensions—along with CRSP defined contribution (DC) and Ministerial Pension Plan (MPP) account balances—will be transferred to an individual account in the United Methodist Personal Investment Plan (UMPIP), a voluntary defined contribution plan maintained by Wespath.
What happens to pension benefits after the General Conference 2019?
For most participants nothing will change.
- If you are receiving pension or annuity payments from Wespath as a retiree, surviving spouse or other beneficiary, your benefits are not changing. Nothing that happened at the 2019 General Conference will change those benefits. However, as was the case before General Conference 2019, if you are receiving benefits from the Pre-82 Plan and terminate your relationship with your annual conference, you would no longer be eligible for future Past Service Rate (PSR) increases.
- If you are an actively serving clergyperson and you remain fully connected to your United Methodist annual conference, your benefit coverage remains the same.
- If you are an active clergyperson who leaves The United Methodist Church (meaning your conference relationship terminates or ends), then the retirement benefits you have earned up to the date you leave will be preserved, but converted to an individual account balance, as explained below.
What happens to accrued pension benefits for a clergyperson who leaves the UMC after General Conference 2019?
If an active clergyperson's annual conference relationship is terminated under ¶360 of The Book of Discipline, all of that clergyperson's accrued pension 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.
Retirement Plan (U.S. Clergy) Years of UMC Service Impact of Leaving UMC Connection Pre-82 Plan Prior to 1982 The clergyperson's benefit is converted into an account balance equivalent and transferred to UMPIP.
- The calculation takes into account both the "formula benefit" [Pre-82 credited service x past service rate (PSR)] and the defined benefit service money (DBSM), and ensures that the participant's benefit reflects whichever of the two produces the greater value.
Ministerial Pension Plan (MPP) 1982 – 2006 MPP benefits are account balances that do not need to be converted. The account balances would be transferred to UMPIP. CRSP defined benefit (CRSP DB) January 2007 – date of termination/ relationship change
- Based on the date of the clergyperson’s departure, DB benefits will no longer accrue service credit.
- CRSP DB benefits would be converted into an account balance and transferred to UMPIP.
CRSP defined contribution (CRSP DC) January 2007 – 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 terminated participant—similar to the participant'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 through monthly annuity payments.
UMPIP benefits are portable, no matter where a clergyperson serves or if the pastor leaves ministry altogether.
I'm hearing rumors like "Wespath will freeze my pension if I disobey The Book of Discipline." Is that true?
No. Wespath follows the terms of the retirement plan documents and applicable federal and state law. Wespath is not the enforcer of Church rules. As explained throughout this FAQ, your pension and retirement benefits are secure. If you remain fully connected to the UMC, your benefits do not change based on anything that happened at the 2019 General Conference. If you leave the UMC, your earned pension benefits are preserved and converted to an account balance that is secure and portable through UMPIP.
How does the pension conversion provision apply to surviving spouses?
Widows, widowers and other survivors currently receiving pension or annuity payments will continue to receive those payments. There is no change in their pension benefits as a result of General Conference 2019.
As a result of General Conference 2019's enactment of the pension conversion provision, an active clergyperson who terminates his or her relationship with the UMC will have his or her benefit converted to an account balance equivalent. If the former UMC clergyperson then dies, the remaining account balance would pass on to the person's heirs.
For clergy who leave the UMC and are required to have their pensions converted to an equivalent account balance: how is the conversion calculated?
The conversion is calculated using the same actuarial assumptions, or "factors," that are used when determining annual conference contributions to fund the pension benefits. These factors are sometimes referred to as "funding factors" and include considerations like expected mortality and long-term investment returns.
The use of funding factors to convert pensions to an equivalent account balance results in an account balance that approximates the value of contributions (with earnings) made by the annual conference to fund the pension of the clergyperson leaving the UMC.
Clergy who are considering terminating their UMC relationship or surrendering their UMC credentials should discuss the process with their annual conference (benefits office). The conference will coordinate with Wespath to assure appropriate benefits administration.
Why aren't "market factors" used instead of "funding factors" when calculating the conversion?
Using "market factors" would result in an account balance that is higher than the amount contributed to fund the future benefits. This would give clergy who leave the UMC a financial advantage over those who stay. Using market factors would also lower the "funded ratio" of the retirement plan, which could harm both annual conferences and clergy who remain with the UMC.
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?
Clergy who terminate or change their relationship with their current annual conference or with the UMC connection may keep their retirement account at Wespath; they are not required to withdraw their account balance and invest elsewhere.
This is also true for clergy who have their pension benefits converted to an equivalent account balance, which is then transferred to UMPIP. For such clergy, any account balances transferred to UMPIP may remain invested with Wespath. Wespath serves many former UMC employees, surviving spouses and beneficiaries.
If an eligible clergyperson participates in the Voluntary Transition Program (VTP), will their accrued pension benefits under CRSP be converted into an account balance and transferred to UMPIP?
Yes, with one exception. The exception is for Associate Members, who are eligible for VTP, but who do not withdraw under ¶360 of the Discipline. Associate Members who participate in VTP will receive VTP benefits, but will not be subject to the mandatory conversion legislation discussed above. All other clergy who participate in VTP will be withdrawing under ¶360, and will receive VTP benefits and have their accrued pension benefits under CRSP converted into an account balance and transferred to UMPIP.
If clergy exit the UMC and become eligible for a distribution from UMPIP, are there any disadvantages to rolling the balance over to an individual retirement account (IRA) or other retirement plan?
Potentially, yes. 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.
If clergy withdraw from their annual conference and do not join another denomination, do they lose the housing allowance exclusion from gross income?
It depends. Terminating one's UMC relationship won't by itself impact whether the clergyperson may apply the housing allowance exclusion to retirement plan distributions.
- However, a rollover of retirement plan benefits from Wespath to an IRA or a future employer's retirement plan could affect the clergyperson's ability to apply the housing allowance exclusion.
Please note: The housing allowance exclusion applies only to compensation earned or retirement benefits accrued while performing services as a "minister of the gospel" as defined by the IRS. Eligibility for the housing allowance exclusion is a tax issue regulated by the IRS. More details are available on the IRS.gov website.
Clergy who are interested in executing a rollover should consult with a tax advisor to assess the risk of losing the housing allowance exclusion.
If a clergyperson exits the UMC, can he or she continue contributing to UMPIP?
Generally, clergy must remain active with an annual conference, local church or other UMC-associated organization that sponsors UMPIP in order to continue contributing. However, if a former UMC clergyperson serves a new employer, a former UMC local church or other organization that is sufficiently associated with the UMC (a "facts and circumstances" analysis based on IRS guidance), and the employer agrees to sponsor UMPIP, then personal contributions to UMPIP may continue.
How are individual clergy pension benefits determined under the Clergy Retirement Security Program (CRSP)?
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.
Will monthly pension benefits being paid to a clergyperson be reduced in the event of a UMC restructure (for example, if many churches leave the UMC, resulting in annual conferences merging)? 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.
- 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) that is transferred into the United Methodist Personal Investment Plan (UMPIP).
- Local churches that leave the UMC 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.
Does any legislation passed at General Conference 2019 impact pensions of currently retired clergy?
No. Retirement benefits for already retired clergy are secure. The pension-related provisions that passed at General Conference 2019 seek to maintain that security.
Did the pension-related petitions that passed at General Conference 2019 apply to clergy in the Central Conferences?
No. Clergy in the Central Conferences receive retirement benefits through the pension plans of those conferences. Those plans do not have connectional liabilities.
These FAQs apply to U.S. clergy, local churches and annual conferences.
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 or local churches) could also impact other clergy benefits administered through Wespath, as explained below.
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 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 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.; these events are related to CPP plan rules and are not specific to leaving the UMC.)
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.)
If an active clergyperson's local church leaves the UMC, will he or she remain eligible for death benefits from CPP?
Yes, the clergyperson remains eligible for CPP death benefits if he or she remains with the UMC and continues to meet the eligibility requirements of CPP. But, if the clergyperson leaves the UMC with his or her local church, then he or she would not remain eligible for death benefits from CPP.
If a retired clergyperson is convicted of Book of Discipline violations with regard to the BOD rules regarding human sexuality or other provisions -- does the clergyperson lose earned pension benefits?
No. Generally, a clergyperson (whether active or retired) cannot lose earned pension benefits through a church trial or other termination. Earned pension benefits are vested under the terms of the retirement plans and cannot be taken away.
However, the clergyperson may forgo certain future pension benefit increases, such as Past Service Rate (PSR) increases under the Pre-1982 Plan. Additionally, the retired clergyperson might have other benefits in retirement that could be affected by termination (for example: retiree medical coverage, which is subject to the rules and policies of the annual conference).
If an already retired clergyperson surrenders his or her UMC credentials (after retirement) or otherwise terminates their conference relationship, would the clergyperson lose earned pension benefits?
No. Generally, an already retired clergyperson who surrenders credential voluntarily after retirement or terminates their conference relationship does not lose earned pension benefits. Earned pension benefits are vested under the terms of the retirement plans and cannot be taken away.
However, the clergyperson may forgo certain future pension benefit increases, such as Past Service Rate (PSR) increases under the Pre-1982 Plan. Additionally, the retired clergyperson might have other benefits in retirement that could be affected by termination (for example: retiree medical coverage, which is subject to the rules and policies of the annual conference).
I'm hearing rumors that Wespath will freeze my church's assets if the local church doesn't follow the Book of Discipline. Is that true?
No. Wespath follows the terms of the retirement plan documents and applicable federal and state law. Wespath is not the enforcer of Church rules. Wespath would not freeze any assets unless required by law, i.e., if ordered to do so by a court of competent jurisdiction.
- As explained throughout this FAQ, participants" pension and retirement benefits are secure.
- As explained below, payments owed by local churches to cover long-term pension liabilities are made to the annual conference—not to Wespath.
- For a local church that chooses to exit the UMC: the annual conference would calculate the amount owed for pension and other obligations.
How does petition 90066 (upheld by the Judicial Council in April 2019) impact what a departing local church might owe to its annual conference?
Petition 90066 (upheld by the Judicial Council) created a disaffiliation path under a new Discipline ¶2553 that allows a departing local church to keep its building, if it pays certain obligations to the annual conference. This in effect suspends the Trust Clause for departing churches that meet the requirements set out in BOD ¶2553.
- Such a disaffiliation with property will require approval by annual conference majority vote.
- ¶2553 (BOD ¶2553.4.d) also requires the disaffiliating local church to pay its share of unfunded pension obligations to the annual conference it is leaving, which is in harmony with ¶1504.23.
See the next question for a recent development regarding BOD ¶2553.
How does the Commission on General Conference's voiding a vote on petition 90066 (due to evidence of improper voting at GC2019) impact what a departing church might owe to its annual conference?
In early August 2019, the Commission on General Conference reviewed an investigation that found evidence of invalid voting at GC2019 that potentially affected the result of a vote on petition 90066 (a motion to substitute a minority report for the text of petition 90066). In light of the evidence, the Commission ruled that the vote on the minority report is void, and asked the Council of Bishops to consider referring the matter to the Judicial Council to examine the potential legal impact on the substitute petition, which ultimately passed. The impact of improper voting on petition 90066 won't be known unless and until Judicial Council rules on such matter.
Petition 90066 creates a new Discipline ¶2553 that provides a disaffiliation path for local churches. That paragraph is in harmony with ¶1504.23, also enacted by GC2019, which requires local churches changing the nature of their connection to The United Methodist Church to pay a proportional fair share of the annual conference's unfunded pension liability to the annual conference (a "withdrawal liability"). Under ¶1504.23, such a departing local church must pay its annual conference the withdrawal liability whether it is departing under the terms of ¶2553 or otherwise.
Paragraph 1504.23 is not impacted by the Commission's findings regarding improper voting. Thus, a ruling by the Judicial Council invalidating ¶2553 would not impact ¶1504.23. Local churches changing the nature of their connection to The United Methodist Church, in whatever manner, would remain responsible for paying to their annual conference the withdrawal liability required by ¶1504.23.
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 local 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 former 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 funding to the conference to support the long-term pension payments promised to active and retired clergy and their surviving beneficiaries. This "fair share" payment also compensates the local church's former 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.
Who calculates an exiting church's share of unfunded pension obligation that must be paid to its annual conference?
The annual conference would determine the amount that an exiting church owes for its share of unfunded pension liabilities. Similarly, the annual conference currently determines the amount each UMC local church pays to fund pension liabilities.
What role would Wespath have in determining pro rata unfunded pension obligations?
At the request of a conference officer, Wespath would estimate the total unfunded liability for accrued benefits and annuities being paid, reflecting recent market conditions for the entire annual conference. But the conference would then decide how to allocate a proportional share of that unfunded liability to a local church. The total unfunded liability, provided by Wespath, would be calculated using market factors, similar to those used by a commercial annuity provider. A conference officer may request to be provided this estimate at any time by contacting their Conference Liaison or the Wespath Actuarial Department.
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, such as local church membership or attendance, or church giving, among others
Upon conference request, Wespath has partnered with some annual conferences to determine the conference's aggregate unfunded pension liabilities. Wespath is available to help annual conferences in developing their formulas.
Does Wespath have any suggestions on how annual conferences might calculate an exiting church's "share" of possible future pension funding?
Wespath suggests the following two-step approach for calculating an exiting church’s “fair share”:
- The conference may obtain from Wespath information about 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”), including funding for: Pre-82 Plan, Ministerial Pension Plan (MPP) and Clergy Retirement Security Program (CRSP).
- The conference then determines 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.
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)].
Is there a way that an entire annual conference can disaffiliate from the UMC? What would it mean for pensions if an annual conference disaffiliates? - Would every local church in the annual conference need to pay a pension withdrawal fee? - Or: would the annual conference as a whole need to pay a withdrawal fee like that for local churches under Discipline ¶ 1504.23 and ¶ 2553?
Wespath is not aware of a legal pathway, as of now, for an annual conference to take such an action. In the absence of a General Conference-approved pathway for a U.S. annual conference to disaffiliate, there would be numerous legal and financial uncertainties.
However, at the 2019 General Conference, there was a petition (Petition 90041) that would have created such a path for disaffiliation by an annual conference. Petition 90041 was reviewed by the Judicial Council and held to be constitutional, but it was never approved by the General Conference.
Moreover, in Appendix 4 to the Commission on a Way Forward Report [page 162 of 2019 ADCA], Wespath suggested that the portion of the pension plan related to an annual conference that were to disaffiliate or become autonomous could be spun-off from the UMC clergy pension plan (CRSP), more or less intact. The plan would be maintained separately by Wespath, and would be funded on a similar basis as today by the former annual conference.
For example: Wespath has done this before for the Puerto Rico Methodist Church (PRMC). PRMC formerly was an annual conference in the Northeastern Jurisdiction. In 1992, the Puerto Rico Annual Conference became an autonomous Methodist church through approval of the General Conference. PRMC remained a plan sponsor of CRSP for many years, and in 2011 (due to federal law changes) the PRMC portion of the plan was 'spun-off" from the rest of CRSP. Today, Wespath maintains and administers the PRMC plan in cooperation with PRMC's governing bodies. The PRMC plan has since become a defined contribution account-balance based plan for all new earned benefits.
The framework for a U.S. annual conference disaffiliation would be fundamentally different than the exit payments that apply to local churches that disaffiliate under Discipline ¶1504.23 and ¶2553.
- As long as the disaffiliating annual conference agreed to retain responsibility for its pension obligations as a separate spun-off plan, there would not be a market-based exit payment like for disaffiliating local churches. Instead, the former annual conference would be responsible for keeping its pension liabilities fully-funded generally on a long-term funding basis, separately from the plan for the remaining UMC annual conferences. The former annual conference would lose the "connectionalism" built into the UMC clergy pension plan, as it would have no claim to support from other annual conferences.
- Wespath would work with the former annual conference to amend its frozen spun-off pension plan to reflect the polity, context and financial capacity of the former annual conference. Going forward, Wespath could serve the former annual conference as administrator of a new defined contribution retirement plan.
- The framework could become more complicated if numerous local churches in the annual conference disagreed with the annual conference's choice to disaffiliate and sought to remain in the UMC (by transfer to a remaining UMC annual conference).
- The framework also would be more complicated if numerous clergy with accrued benefits, retirees or surviving spouses were to choose to remain part of the UMC, even though their annual conference disaffiliates.
Wespath continues to analyze these additional complications in preparation for the 2020 General Conference.
- If the disaffiliating annual conference declines to retain responsibility for its pension obligations and instead leaves those liabilities with the remaining UMC annual conferences (who are collectively responsible for the pension plan), only then would the disaffiliating conference need to make some sort of exit payment.
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 the liabilities would be priced at on the open market and is often the starting point that 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). Such a third party would typically add on additional charges for the assumption of risk, profit and administrative fees.
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.
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 those benefit payments. Long-term financial risk is affected by factors such as investment conditions and longevity (i.e., how long participants and surviving spouses/beneficiaries are estimated to receive promised payments).
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 unfunded liability related to the mandatory pension plans. However, there may be other obligations of the conference for which the local church may be asked by the conference to make a withdrawal liability payment for. Even if the conference plans are fully funded on a long-term basis at the time the local church exits, 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.
Where would exit payments be held?
Legislation passed by General Conference 2019 requires that a local church's exit payment ("withdrawal liability") be paid to its former 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.
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 left The United Methodist Church connection before General Conference 2019 might have been expected to pay its fair share of unfunded pension liability to the annual conference from which it departed.
Annual conferences may have sought these contributions in the past. Petition 90016, which passed at General Conference 2019, amended language in The Book of Discipline to require such contributions (Discipline ¶1504.23).
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
The legislation that passed at General Conference 2019 (Petition 90016—(Discipline ¶1504.23) requires payment only with respect to the local church's share of unfunded pension liabilities. However, the General Conference amended Petition 90016 to clarify that this does not prohibit annual conferences from collecting additional monies from departing local churches, including those listed above.
Did the 2019 General Conference approve a "gracious exit" for local churches?
Yes. The 2019 General Conference approved Petition 90066, adding Discipline ¶2553, which allows a local church to disaffiliate from the UMC under certain circumstances. Discipline ¶2553 requires a period of discernment by the local church, but then allows the local church to disaffiliate from the UMC by a 2/3 vote of the church conference, provided that the local church pays its fair share of the annual conference's pension obligations and certain other financial obligations, and the annual conference board of trustees approves.
Does any of the legislation passed at General Conference 2019 impact retirement benefits for lay employees?
No. Pension-related legislation that passed at General Conference 2019 does not impact retirement benefits of lay employees. 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.
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.
Can Wespath serve churches or clergypersons who choose to leave 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.
- Wespath can administer benefits for a group of churches—or even a single church—that may break away from 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.
How is Wespath preparing for the future?
- 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 far into the future
- Wespath is well-positioned to continue fulfilling our mission of caring for those who serve the Church.
- Wespath is authorized to administer benefit plans for groups of churches that break away from the UMC.
Are the amendments being considered for retirement plan designs for the 2020 General Conference a result of potential changes to UMC structure or other disruptions following General Conference 2019?
No. 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-based 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 that follow the 2019 General Conference will accelerate the need for transition to an account-based plan design in place of a connectional plan design.
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.
Does Wespath still intend to propose an account-based retirement plan to General Conference 2020?
Yes. Wespath believes that an account-based plan design will be more sustainable over the long term, due to future church departures, shifting demographics, the declining size of the U.S. Church and other factors.
An account-based plan would help:
- Protect conferences from decades-long pension obligations, permit plan sponsors to satisfy each year's obligations (for easier budgeting), and limit long-term liability costs;
- 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 generally would not be affected.
Does General Conference 2019 affect Wespath's ability to serve institutional investors?
No. Wespath is authorized to manage funds and offer services to nonprofit organizations that are related to the UMC. That has not changed.
- Wespath can continue to serve organizations that share "common religious bonds and convictions" with the UMC.
- Wespath Institutional Investments remains committed to enabling clients to meet their investment objectives by offering access to world-class investment managers, a globally-recognized sustainable investment program and global market diversification.
- Wespath is well-positioned for the future. We are focused on assuring that the funds we manage on behalf of our institutional clients remain sustainable for the future.
Will General Conference 2019 outcomes impact investment decisions of Wespath Institutional Investments?
No. Wespath's investment process is not affected by the outcome of GC2019.
- Wespath has always, and will continue to, operate as a prudent fiduciary on behalf of our participants and institutional investors.
- Our 10 Investment Beliefs, which guide Wespath's investment approach, remain in place. Our most important belief—our Investor Focus—states that our activities must support the financial well-being of those we serve. They also speak to our aspiration to provide financial stability and security to those we serve, both now and in the future.
Would any retirement or other benefit related claims or the liabilities associated with the Church's pension and benefit plans cause risk to the accounts that institutional investors maintain with Wespath?
No. The assets Wespath manages for its institutional clients (directly or through its subsidiary Wespath Institutional Investments) are held in trust separate from the benefit plan assets that Wespath manages. The trust protects the institutional investor assets from claims by Wespath's creditors, as well as the claimants of the UMC benefit plans.
Similarly, the assets dedicated to the UMC benefit plans are held in separate state law trusts. The trusts protect the plans" assets from claims by Wespath's creditors, as well as the creditors of other benefits plans.
Is there any foreseeable scenario under which Wespath would freeze the assets of an institutional investor purely as a result of a schism and/or church departure?
Wespath is a service provider to its institutional investors under the legal terms of investment management contracts. Wespath would not freeze the assets of an institutional investor unless required by law, i.e., if ordered to do so by a court of competent jurisdiction. Although Wespath does not believe that such a ruling or order would be likely, it cannot rule out the possibility of such a ruling or order being issued.
Submit a Question
Do you have an additional question for Wespath Benefits and Investments on how outcomes of General Conference 2019 impact clergy benefits, as well as related effects on local churches, annual conferences or institutional investors? Please submit your question to Wespath.