THE MISSISSIPPI CONFERENCE OF THE UNITED METHODIST CHURCH EMPLOYEE MEDICAL BENEFITS PLAN Jackson, Mississippi Audited Financial Statements Years

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1 THE MISSISSIPPI CONFERENCE OF THE UNITED METHODIST CHURCH EMPLOYEE MEDICAL BENEFITS PLAN Jackson, Mississippi Audited Financial Statements

2 CONTENTS Independent Auditor's Report 1 2 Financial Statements Statements of Net Assets Available for Benefits 3 Statements of Changes in Net Assets Available for Benefits 4 Statements of Plan Benefit Obligations 5 Statements of Changes in Plan Benefit Obligations 6 Notes to Financial Statements 7 12 Independent Auditor's Report on Supplementary Information 13 Supplemental Schedule of Net Assets Available for Benefits, As Adjusted 14 Supplemental Schedule of Changes in Net Assets Available for Benefits, As Adjusted 15

3 INDEPENDENT AUDITOR'S REPORT The Board of Medical Benefits The Mississippi Conference of the United Methodist Church Employee Medical Benefits Plan Jackson, Mississippi Report on the Financial Statements We have audited the accompanying statements of net assets available for benefits and of plan benefit obligations of The Mississippi Conference of the United Methodist Church Employee Medical Benefits Plan (the "Plan") as of December 31, 2013 and 2012, and the related statements of changes in net assets available for benefits and of changes in the Plan benefit obligations for the years then ended and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.

4 Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial status of the Plan as of December 31, 2013 and 2012, and the changes in its financial status for the years then ended, in accordance with accounting principles generally accepted in the United States of America. Ridgeland, Mississippi May 13,

5 Statements of Net Assets Available for Benefits December 31, 2013 and ASSETS Cash and cash equivalents $ 6,102,607 $ 6,009,565 Prepaid expenses 1,652 - Receivables Due from Conference 601, ,902 Other receivables, net of allowance of $33,491 and $27,394, respectively 20,014 5,950 Total receivables 621, ,852 Total assets 6,726,004 6,731,417 LIABILITIES Deferred revenue 43,066 - Due to others 7,212 2,143 Total liabilities 50,278 2,143 Net assets available for benefits $ 6,675,726 $ 6,729,274 See accompanying notes. 3

6 Statements of Changes in Net Assets Available for Benefits Additions to Plan assets attributed to Contributions from mission shares and participants $ 7,125,247 $ 7,861,267 Interest income 104, ,600 Total additions 7,229,544 7,988,867 Deductions from Plan assets attributed to Payments for health claims, net of rebates and reimbursements of $79,814 and $467,362, respectively 3,468,182 4,423,700 Fully insured medicare supplement 1,867, ,468 Ancillary benefit premiums 177, ,249 Funding for post retirement health benefit obligations 1,005,200 1,000,000 Administrative expenses 764, ,322 Total deductions 7,283,092 7,356,739 Net increase (decrease) in Plan assets (53,548) 632,128 Net assets available for benefits, beginning of year 6,729,274 6,097,146 Net assets available for benefits, end of year $ 6,675,726 $ 6,729,274 See accompanying notes. 4

7 Statements of Plan Benefit Obligations Amounts currently payable Health claims payable $ 5,900 $ 104,239 Claims incurred but not reported 276, ,395 Funding payable to Conference for post-retirement health benefit obligations 750,000 1,005,200 Total obligations other than post-retirement benefit obligations 1,032,200 1,476,834 Post-retirement benefit obligations, net of amounts currently payable Current retirees 6,547,956 7,026,179 Other active participants fully eligible 66,923 82,064 Other active participants not fully eligible 4,058,992 3,650,320 Total post-retirement benefit obligations 10,673,871 10,758,563 Plan's total benefit obligations $ 11,706,071 $ 12,235,397 See accompanying notes. 5

8 Statements of Changes in Plan Benefit Obligations Amounts currently payable Balance at beginning of year $ 1,476,834 $ 1,615,281 Claims reported and approved for payment 2,364,643 4,190,849 Claims paid (3,468,182) (5,256,168) Funding for post-retirement health benefit obligations 750,000 1,005,200 Net change in estimated incurred but not reported claims (91,095) (78,328) Balance at end of year 1,032,200 1,476,834 Post-retirement benefit obligations, net of amounts currently payable Balance at beginning of year 10,758,563 20,499,976 Increase (decrease) during the year attributable to Benefits paid (1,867,921) (2,091,988) Service cost 226, ,603 Interest cost 497, ,100 Plan participants' contributions 919, ,229 Plan amendments - (10,784,351) Actuarial loss 139, ,994 Balance at end of year 10,673,871 10,758,563 Plan's total benefit obligations at end of year $ 11,706,071 $ 12,235,397 See accompanying notes. 6

9 NOTES TO FINANCIAL STATEMENTS Note 1. Plan Description The following description of The Mississippi Conference of the United Methodist Church Employee Medical Benefits Plan (the "Plan") provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions. General The Plan is a self-funded welfare benefit plan, which provides health benefits to substantially all employees and ministers of The Mississippi Annual Conference of the United Methodist Church (the "Conference"). Effective August 1, 2012, the Plan was amended to provide a defined dollar benefit equal to $7 per month per employee per year of service in Mississippi up to 35-year maximum, based on the records of the General Board of Pensions. The amendment was measured as of August 1, 2012 using a discount rate of 5 percent and is effective for both current and future retirees. Surviving spouses are grandfathered in and will continue to receive 100 percent of the retirees' benefits. Benefits The Plan provides health benefits (hospital, surgical and major medical) to eligible participants as specified in the Plan's benefit schedule, beginning on the date of employment. Eligibility Each full-time employee, as defined by the Book of Discipline, who is a member of the Eligible Class is eligible to become a Participant in the Plan beginning on the date of employment or in the case of Clergy, upon being appointed. The Eligible Class, prior to August 1, 2012, includes; (1) Clergy (as defined by the Book of Discipline) under appointment by the bishop; (2) retired Clergy who were appointed full-time at retirement; (3) retired full-time lay Conference Employees and retired full-time lay employees grandfathered at merger; (4) full-time Local Pastors; (5) Diaconal Ministers; (6) Certified Candidates for the ordained ministry who are attending seminaries approved by the University Senate with the intention to return to the Mississippi Conference; (7) full-time Conference Employees; (8) full-time employees of the district offices; (9) full-time employees of The Mississippi United Methodist Foundation, Inc.; (10) full-time employees of The United Methodist Church Mississippi Area Episcopal Office; (11) full-time local church staff persons who were covered under the former Mississippi Conference and North Mississippi Conference Plans; (12) retired Diaconal Ministers and retired lay employees who were covered under the former Mississippi Conference and North Mississippi Conference Plans; (13) incapacitated members of the Eligible Class (and their eligible Dependents that were covered by the Plan at the time the incapacity occurred); (14) retired Diaconal Ministers who were not formally covered under the former Mississippi Conference or the North Mississippi Conference Plans; (15) and effective April 1, 2007, Lay employees of the Mississippi Conference UMC Disaster Response, Inc. 7

10 NOTES TO FINANCIAL STATEMENTS Note 1. Continued The following Plan changes regarding eligibility were adopted and made effective as of August 1, 2012: (1) Require participation in the active Plan for 5 years prior to going onto the Medicare Supplement Plan; (2) Lay employees are allowed access to the Medicare Supplement with 10 years of compensated service in the United Methodist Church with the last 5 years of service prior to retirement as an employee on the Conference Plan. Contributions Mission Shares Contributions from churches within the Conference are recorded as mission shares during the budget period to which they apply. Active Participants The Plan agreement provides for the Conference to make contributions to the Plan based on the amounts necessary to provide benefits for employees. Employees contribute specified amounts, determined periodically by the Plan's actuary, to provide coverage to their eligible dependents. Retirees Cost Sharing Provisions Participants employed by the Conference are eligible for post-retirement health insurance benefits. Each non-clergy participant is required to pay the full cost of the coverage. Prior to August 1, 2012, an annual retiree credit, prorated monthly, is available to retired Clergy based on the following formula: total years of service at retirement (not rounded) as recorded in the General Board of Pensions and Health Benefits ("GBOPHB"), multiplied by a percentage as included in the enrollment materials. Effective August 1, 2012, the Plan was amended to provide a defined dollar benefit equal to $7 per month per employee per year of service in Mississippi up to 35-year maximum based on the records of the GBOPHB. Those who are currently receiving a credit based on years of service outside of the Conference will continue, as well as surviving spouses, to receive insurance at no cost. 8

11 NOTES TO FINANCIAL STATEMENTS Note 1. Continued Other Although it has not expressed any intention to do so, the Conference has the right under the Plan to modify the benefits provided, to discontinue its contributions at any time and to terminate the Plan. Note 2. Summary of Accounting Policies Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, benefit obligations and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents consist of daily interest bearing money market and interest bearing funds on deposit and payable on demand with the Mississippi United Methodist Foundation, Inc. (the "Foundation"). Interest income is recognized when earned. Reinsurance Contracts The Plan carries two levels of reinsurance with policy periods from August 1 through July 31. The first level covers all individual participants' claims aggregating in excess of $107,000, after meeting a $175,000 deductible per individual. The second level reinsures against aggregate claims over a level calculated under the terms of the policy. At December 31, 2013, the Plan had not reached the maximum aggregate claims under the second level of reinsurance coverage. Post-retirement Benefits The amount reported as the post-retirement benefit obligation represents the actuarial present value of estimated future benefits that are attributed to participants' service rendered as of the date of the financial statements, reduced by the actuarial present value of contributions expected to be received in the future from current Plan participants. Post-retirement benefits include future benefits expected to be paid to or for (1) currently retired participants and their beneficiaries and dependents and (2) active participants and their beneficiaries and dependents after retirement from service with participating employers. The post-retirement benefit obligation represents the amount that is to be funded by contributions from the Conference mission shares and from existing Plan assets or contributions from participants. Prior to an 9

12 NOTES TO FINANCIAL STATEMENTS Note 2. Continued active participant's full eligibility date, the post-retirement benefit obligation is the portion of the expected post-retirement benefit obligation that is attributed to that participant's service rendered as of the valuation date. The present value of the expected post-retirement benefit obligation is determined by an actuary and is the amount that results from applying actuarial assumptions to historical claims-cost data to estimate future annual incurred claims costs per participant. The present value of the expected post-retirement benefit obligation also adjusts such estimates for the time value of money (through discounts for interest) and the probability of payment (by means of decrements such as those for death, disability, withdrawal or retirement) between the valuation date and the expected date of payment. The following were significant assumptions used in the valuations as of December 31, 2013 and 2012: Weighted-average discount rate 5.00% in 2013 and 2012 Average retirement age 5% at ages 62-64; 25% at ages 65-69, 100% at age 70 for 2013 and 2012 Mortality rate 2000 Combined Mortality Table for 2013 and 2012 Healthcare cost trend rate 5% per annum (Prior to August 1, 2012, no effect thereafter) The foregoing assumptions are based on the presumption that the Plan will continue. Were the Plan to terminate, different actuarial assumptions and other factors might be applicable in determining the actuarial present value of the post-retirement benefit obligation. Other Plan Benefits Plan obligations at December 31, 2013 and 2012 for health claims incurred by active participants but not reported at that date and for accumulated eligibility of participants at December 31, 2013 and 2012 are estimated based on total claims paid and historical claims experience. Health claims incurred by retired participants, but not reported at year-end, are included in the postretirement benefit obligation. Payments for health claims are net of rebates and reimbursements primarily relate to Medicare and pharmacy benefits. 10

13 NOTES TO FINANCIAL STATEMENTS Note 2. Continued Reclassifications Certain amounts in the prior year have been reclassified for comparative purposes to conform to the presentation in the current year financial statements. These reclassifications had no effect on previously reported net assets available for benefits or Plan benefit obligations, or changes therein. Note 3. Benefit Obligations The Plan's deficiency of net assets over benefit obligations at December 31, 2013 and 2012, relates primarily to the post-retirement benefit obligation, the funding of which is not fully covered by the present contribution rate provided by the Conference and employees' dependent coverage. It is expected that the deficiency will be funded through future increases in the contribution rates. The Plan's deficiency of net assets over Plan obligations is consolidated into the Conference's financial statements since the responsibility of the future funding status resides at the Conference level. During 2009, the Plan contributed $1 million to the Conference to begin funding the post-retirement benefit obligation. An additional contribution of $750,000 and $1,005,200 was declared during the 2013 and 2012 Plan years, respectively, and is reflected on the statement of Plan benefit obligations. These funds are held by the Conference as a restricted contribution to be used solely to fund the post-retirement obligation. Note 4. Tax-Exempt Status The Internal Revenue Service has determined and informed the Conference in a letter dated August 12, 1992, that the Plan is qualified and the trust established under the Plan is tax-exempt under the appropriate sections of the Internal Revenue Code (the "Code"). The Conference believes that the Plan, as amended, continues to qualify and to operate in accordance with applicable provisions of the Code. The Plan has determined that there are no significant uncertain tax positions as of December 31, 2013 and All tax periods after 2009 remain open to examination by the taxing jurisdictions to which the Plan is subject. Note 5. Related Party Transactions The Conference receives mission shares from the churches within the Conference and remits them to the Plan. The amount due from the Conference represents mission shares that have not been transferred to the Plan. 11

14 NOTES TO FINANCIAL STATEMENTS Note 6. Administrative Expenses Administrative expenses consist of the following as of December 31, 2013 and 2012: Plan administration fees $ 231,424 $ 338,974 Reinsurance 211, ,112 Wellness program 179, ,133 Professional fees 68,919 74,423 Salaries and benefits 56,877 63,317 Bad debt Office supplies and meetings 6,097 3,015-5,364 Bonding fees Bank charges 4,830 2,776 4,830 3,169 $ 764,632 $ 949,322 Note 7. Risks and Uncertainties As of December 31, 2013, the Plan had funds in the amount of $5,502,207 invested with the Foundation. The Board believes the risk of loss associated with the Foundation is minimal; however, such funds are not federally insured. As of December 31, 2013, the Plan had $423,783 of funds on deposit with a federally insured bank in excess of the $250,000 federal deposit insurance coverage limit. The actuarial present value of benefit obligations is reported based on certain assumptions pertaining to interest rates, healthcare inflation rates and employee demographics, all of which are subject to change. Due to uncertainties inherent in the estimation and assumption process, it is at least reasonably possible that changes in these estimates and assumptions in the near term would be material to the financial statements. Note 8. Subsequent Events The Plan has evaluated subsequent events through May 13, 2014, the date the financial statements were available to be issued. 12

INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION The Board of Medical Benefits The Mississippi Conference of the United Methodist Church Employee Medical Benefits Plan Jackson, Mississippi

15 INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION The Board of Medical Benefits The Mississippi Conference of the United Methodist Church Employee Medical Benefits Plan Jackson, Mississippi We have audited the financial statements of The Mississippi Conference of the United Methodist Church Employee Medical Benefits Plan (the "Plan") as of and for the years ended December 31, 2013 and 2012, and have issued our report thereon, dated May 13, 2014, which contained an unmodified opinion on those financial statements. Our audits were performed for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Ridgeland, Mississippi May 13,

16 Supplemental Schedule of Net Assets Available for Benefits, As Adjusted ASSETS Cash and cash equivalents $ 6,102,607 $ 6,009,565 Prepaid expenses 1,652 - Receivables Due from Conference 601, ,902 Other receivables, net of allowance of $33,491 and $27,394, respectively 20,014 5,950 Total receivables 621, ,852 Total assets 6,726,004 6,731,417 LIABILITIES Funding payable to Conference for post-retirement health benefit obligations 750,000 1,005,200 Deferred revenue 43,066 - Due to others 7,212 2,143 Claims payable 5, ,239 Total liabilities 806,178 1,111,582 *Net assets available for benefits, as adjusted $ 5,919,826 $ 5,619,835 *Net assets available for benefits, as adjusted, include the impact of amounts currently payable as of December 31, 2013 and 2012, except for claims incurred but not reported. See independent auditor's report on supplementary information. 14

17 Supplemental Schedule of Changes in Net Assets Available for Benefits, As Adjusted Additions to Plan assets attributed to Contributions from mission shares and participants $ 7,125,247 $ 7,861,267 Interest income 104, ,600 Total additions 7,229,544 7,988,867 Deductions from Plan assets attributed to *Payments for health claims, net of rebates and reimbursements of $79,814 and $467,362, respectively 3,369,843 4,358,381 Fully insured medicare supplement 1,867, ,468 Ancillary benefit premiums 177, ,249 Funding for post-retirement health benefit obligations 750,000 1,005,200 Administrative expenses 764, ,322 Total deductions 6,929,553 7,296,620 Net increase in Plan assets 299, ,247 *Net assets available for benefits, as adjusted, beginning of year 5,619,835 4,927,588 *Net assets available for benefits, as adjusted, end of year $ 5,919,826 $ 5,619,835 *Net assets available for benefits, as adjusted, include the impact of amounts currently payable as of December 31, 2013 and 2012, except for claims incurred but not reported. See independent auditor's report on supplementary information. 15

2016 Audited Financial Statements

2016 Audited Financial Statements NORTH GEORGIA CONFERENCE, UNITED METHODIST CHURCH Contents Independent Auditor s Report 1-2 Financial Statements Statements of Financial Position 3 Statements of Activities