Westpath Answers to Questions: 10/24/19
Please provide us with the financial implications on unpaid pension liability to the New England Annual Conference, and the cost of Wespath administrating that liability should the Conference split.
Wespath’s proposed legislation envisions the creation of a new Discipline ¶2555, Pension Obligations and Related Procedures for Disaffiliation from The United Methodist Church by U.S. Annual Conferences or Groups of Local Churches. The relevant petition can be found at https://www.wespath.org/assets/1/7/Wespath-Petition-Par-2555.pdf (all of Wespath’s petitions along with explanatory materials can be found at https://www.wespath.org/gc2020/).
Unlike the provisions passed at GC2019 (now in ¶1504.23) which dealt with individual churches disaffiliating, ¶2555 is intended to create a means to split the pension plans and associated assets and liabilities in the case of disaffiliation of entire groups of churches (up to and including entire annual conferences). In a nutshell, ¶2555 would mean that each side would be assigned the assets and liabilities related to their clergy (active and retired). This allocation is intended to be done in an equitable fashion on a long-term funding basis. Unlike the disaffiliation of individual churches, no one-time payment of unfunded pension liabilities would be required. Instead, any newly created denomination would become the plan sponsor and would inherit any long-term funding obligations.
Wespath has worked with the authors of some of the disaffiliation or dissolution petitions including the Indianapolis Plan and the Next Generation UMC Plan. Those plans would coordinate well with the above mentioned ¶2555. We recognize that there are other disaffiliation/dissolution petitions—including the N.E.W. Plan—that were developed without discussions that involved Wespath staff. Based on the explanations available for the N.E.W. Plan, we believe it is also broadly compatible with our proposed ¶2555. In general, we are happy to discuss pension implications for any of the plans.
Do the financial liabilities vary by plan? If so, how?
If this question refers to “plan” as in “pension plan”, the answer is yes, the liabilities (and funded status) vary by pension plan and conference. The pension liabilities reside in three plans: (i) the Pre-82 plan, which is unique to each conference, (ii) the MPP plan (connectional, shared across all conferences), and (iii) the CRSP-DB plan (also shared). As of October 1, all of the plans are fully funded on a long-term funding basis. This includes the New England specific Pre-82 plan which is almost precisely 100% funded on a funding basis. On a “market basis” (i.e., as valued by a commercial insurer based on short-term interest rates), the plans are less than 100% funded, which is where the potential withdrawal liability payment in case of individual church withdrawals under ¶1504.23 (introduced in GC2020) comes from.
If this question refers to “plan” as in type of disaffiliation plan (Indianapolis plan, etc.), we believe that our ¶2555 (as described above) could apply in all situations. As mentioned above, many of the plans available are compatible with the language in the proposed ¶2555 or refer to it explicitly.
What, if anything, can be done to mediate the effects of a split/splintering of the denomination?
As described above, we believe Wespath’s proposed legislation would help mediate the effects of a split/splintered denomination. We believe that clergy would benefit from not only maintaining their benefits but having those benefits sponsored by their respective expression of Methodism. At the same time, churches and annual conferences would benefit from not having to come up with money at the time of the split.
If NEAC becomes autonomous in whole or in part, alone or with others, could we still participate in Wespath/ allow accounts to continue?
Yes, we believe so. Wespath is positioned to serve all clergy and all future expressions of Methodism. If Wespath’s proposed petition for pension liabilities for disaffiliating groups is approved, then it allow Wespath to create a separate plan for NEAC, if it were to become autonomous, with assets and liabilities (funding level) that exist for the NEAC portion of the UMC plan today. Some local churches may separate from NEAC to remain UMC, in which case Wespath would shift some liabilities and assets from the NEAC plan back to the UMC plan. That petition would also allow the autonomous NEAC to continue to sponsor new benefits for clergy and employees through Wespath’s other benefit plans.
If other ACs did this (remained with Wespath despite “disaffiliating”) does Wespath have a sense of how that would impact or not the stabilization of the unfunded liability?
The legislation is intended to equitably split assets and liabilities and therefore distribute the burden of any current or future unfunded liability to all future expressions of Methodism. As such, the stability of the system should not be materially impacted. Of course, the long-term stability of the programs and the ability to remedy potential underfunding that might develop in the future depends on the success of the new self-governing Methodist churches or other groups of churches as they may develop.
We are hoping that the above is helpful as you prepare for the upcoming meeting. We will be happy to discuss the above and any question you might have in more detail in our meeting.
Martin Bauer, FSA, MAAA
Sr. Managing Director, Benefit Plans
Wespath Benefits and Investments
t (847) 866-4572 | m (847) 790-6515
From: Bill Burnside <firstname.lastname@example.org>
Date: Wed, Oct 23, 2019 at 2:20 PM
Subject: RE: discernment
To: Chebeague Island UMC <email@example.com>
CC: firstname.lastname@example.org <email@example.com>, David Hoyt (firstname.lastname@example.org) <email@example.com>, Brenda Borchers <firstname.lastname@example.org>
This email will confirm that I have received, as Treasurer and Director of Administrative Services of the New England Annual Conference, your disaffiliation process notification as outlined in Resolution 19-211. I will continue to pray for your church as you continue to discern.
My current understanding is that Petition 90066, that was passed at GC2019, has been determined void by the Commission on the General Conference, and has been referred to the Judicial Council for determination of its validity. This may impact the newly adopted Par 2553 regarding disaffiliation. Further, a question of law regarding RS 19-211 is under review by Judicial Council.
Nevertheless, here are answers to your questions as we have them today. Much more work will need to be done for a thorough response if/when we learn that Par 2553 and RS 19-211 withstand Judicial Council review and remain intact.
Pension Liabilities – A disaffiliating local church shall contribute a withdrawal liability in an amount equal to its pro rata share of any aggregate unfunded pension obligations to the annual conference. The General Board of Pension and Health Benefits shall determine the aggregate funding obligations of the annual conference using market factors similar to a commercial annuity provider, from which the annual conference will determine the local church’s share. This item is currently being examined by the Conference Board of Pensions. I will have a better idea on this amount once their work is done.
Apportionments – The local church shall pay any unpaid apportionments for the 12 months prior to disaffiliation, as well an additional 12 months of apportionments. Your church should have received the 2020 apportionments and should be able to determine the 12 months prior amount if your church disaffiliates in 2020. The 2021- 2023 apportionments have not been determined.
Any other terms and conditions to be determined by the annual conference’s Board of Trustees have not yet been deliberated.
I will be in touch with you with any specifics as they become clear and available. Blessings on your continued process of discernment relative to this difficult decision.
William V. Burnside II
New England Conference
978-682-8055 Ext. 110