Brief History of the Brethren in Christ Pension Fund
The Minister’s Pension Fund was launched in 1964 to help care for Brethren in Christ pastors in their retirement. In those early years, the denomination, like the majority of US employers, opted for a Defined Benefit (DB) plan that promised participants a specific monthly benefit at retirement.
From a starting benefit of $2 a month for each year of active service with the Brethren in Christ Church, the monthly benefit amount has been adjusted upward at various points over the years, to the current $9 a month. In each case, the increase in the monthly benefit was applied retroactively. And again, this mirrored the actions of most DB plan sponsors.
In addition, in the late 1980’s, the BIC Church offered its pastors the opportunity to establish a Retirement Income Account as a way of building up their retirement funds. For many BIC pastors, these funds now far exceed the value of the DB benefit.
During the stock market run-up of the 1990’s, strong asset returns put many DB plans—including the BIC plan—in over-funded positions. For much of the fund’s history, the denomination was able to operate the DB plan with a modest annual payment from BIC churches of $300 per pastor. When congregations were unable to make this payment, shortfalls were absorbed into the fund.
But what a difference a decade made.
Beginning in 2000, all of this virtually changed with a three-year stock market slide accompanied by a sharp decline in interest rates. As assets dropped and liabilities increased, the funding percentages of many DB plans deteriorated rapidly. DB plan sponsors who had grown accustomed to their plans being very inexpensive or free, were suddenly faced with contribution requirements that were volatile and often higher than at any time in the history of the plans. Such was the situation of the BIC Defined Benefit plan.
Starting in 2002, and continuing in subsequent years, the expected annual allocation by congregations to the DB portion of the retirement fund was increased to keep pace with actuarial requirements, reaching $2,150 per pastor in 2009. These dollars were taken out of the requested 10 percent contribution from the church for the pastor’s retirement funding. Despite these increased contributions, the pension fund reached a position of significant underfunding—a situation that has been further exacerbated by the recent steep downturn in the U.S. economy. Net assets within the DB fund declined from 5 million dollars at the beginning of 2008 to 3.4 million by year’s end. Meanwhile, payments to retired pastors and beneficiaries have continued to grow as more pastors move into retirement.
After considering possible options for addressing the underfunding, the General Conference Board approved a “hard freeze” of the DB plan, with no further accruals of benefits and no new participants added to the DB plan after January 1, 2010. Concurrent with the freeze, the existing TSA portion of the plan, which contains the retirement income accounts, has been spun off as a new plan.
Throughout the fall of 2009, information sessions (live and/or by telephone) were hosted in all seven of the U.S. conferences for the purpose of apprising pastors and other church workers of the coming change in the DB plan and to answer questions. Then in mid-December, information packets were mailed to plan participants that included a form by which pastors could intent their intent to waive existing benefits in the DB plan and opt out of future participation.
