HAM 2 SUPPLEMENTING PENSION BENEFITS 10% FROM THE SALE OF PROPERTIES Origin: Hamilton Conference

Transcription

1 HAM 2 SUPPLEMENTING PENSION BENEFITS 10% FROM THE SALE OF PROPERTIES HAM 3 SUPPLEMENTING PENSION BENEFITS UNITED CHURCH PENSIONERS BC 2 CONCERN OVER PRESENT AND FUTURE UNITED CHURCH PENSIONERS SK 4 FAIR PENSION OUTCOMES TOR 6 INFLATION AFFECTS PENSIONERS TOO: ADDING COST OF LIVING ALLOWANCE TO RETIREES PENSION AS WITH ACTIVE MEMBERS SALARY HAM 2 SUPPLEMENTING PENSION BENEFITS 10% FROM THE SALE OF PROPERTIES Origin: Hamilton Conference 1. What is the issue? We believe that God is calling us to better financially support our retirees through supplementing United Church pensions. 2. Why is this issue important? The prophets continually reminded the nation of Israel to look after the widow, the orphan and the foreigner in their midst. God has a special concern for the vulnerable in society. In today's world, the elderly and those on pensions, increasingly fall into the category of vulnerable people. Background: There has not been a pension benefit increase since 2009, and there is no pension increase planned for the near future. Since the last increase in 2009 the Consumer Price Index in Canada has risen by approximately 15%, leaving United Church pensioners with less and less buying power. At present there is no 'cost of living' increment in United Church Pensions. The Pension Plan is fully funded on a going forward, solvency, and wind up basis as of the last actuarial valuation. Since the number of pensioners (approximately 4,500) is greater than the number of active members (about 3,500), the Plan is largely dependent upon market conditions to improve its funded status. Two decades of low interest rates and uneven markets have revealed the vulnerability of this funding model: the Pension Plan has not been able to protect its members from inflation. When United Church ministries cease to exist and properties are sold, this would be the time to consider setting aside a portion of the funds to be used to supplement United Church pensions. As pension law currently stands, there are restrictions on adding funds to a multiemployer pension plan such as ours. However with some creativity, other methods of supplementing retirement pensions could be developed. We imagine money Page 1 of 14

2 accumulating in a restricted use fund until a method of augmenting pensions is developed. Just as 'outside of the box thinking' was used to supplement pre 1955 pensions through the church's Ventures in Mission campaign, now is the time for more 'outside of the box' thinking to supplement retirement pensions. Pensioners report that their monthly pension benefit from the UCC Pension Plan after a thirty plus year career in the United Church is typically 35% 45% of their preretirement earnings (including housing allowance), making retirement precarious and tense for many Pension Plan members. If no action is taken to help supplement United Church pensions, in 10 years, Pension Plan members could see their buying power reduced another 15% for a total of 30% less. At present the General Council cannot pass this motion for the whole church because of the way the United Church was set up in Some Conferences set aside a percentage of the sale of property to meet their allocation to support the National United Church Archives. We now recommend that each of the regions or Conferences/ Presbyteries encourage that 10% of the net proceeds of the sale of all United Church property where ministries cease to exist, into a restricted use fund of The United Church of Canada. This fund will be used to supplement pension benefits for both current and future members of the United Church Pension Plan.. 3. How might the General Council respond to the issue? We propose that the General Council recommend to the regions or Conferences/ Presbyteries that they encourage that 10% of the net proceeds of the sale of all United Church properties within their bounds where ministries have ceased to exist, into a restricted use fund of The United Church of Canada. This fund will be used to supplement pension benefits for both current and future members of the United Church Pension Plan once it is large enough and a distribution policy has been developed. The fund will remain in place as long as the United Church Pension Plan exists. Page 2 of 14

3 HAM 3 SUPPLEMENTING PENSION BENEFITS UNITED CHURCH PENSIONERS Origin: Hamilton Conference 1. What is the issue? We believe that God is calling us to better financially support our retirees through supplementing United Church pensions. 2. Why is this issue important? The prophets continually reminded the nation of Israel to look after the widow, the orphan and the foreigner in their midst. God has a special concern for the vulnerable in society. In today's world, the elderly and those on pensions, increasingly fall into the category of vulnerable people. Background: It is hard to believe that the architects of the United Church Pension Plan envisioned such a large number of pastoral charges being served by retired ministry personnel. Due to changes in the Income Tax Act these pastoral charges no longer contribute to the Pension Plan at a time when it most needs the contributions of all pastoral charges due to low interest rates. It is time to do some 'outside the box' thinking to provide another vehicle for pastoral charges being served by retired ministry personnel to contribute financially to the well being of retired ministry personnel. The United Church of Canada used to require equivalent contributions from pastoral charges being served by retired ministry personnel, until the Income Tax Act changed its rules and it was no longer possible. It is hoped by using a restricted use fund outside of the formal Pension Plan, that this practice can be re instated. Reason this practice needs to re instated NOW: There has not been a pension benefit increase since 2009, and there is no pension increase planned for the near future. Since the last increase in 2009 the Consumer Price Index in Canada has risen by approximately 15%, leaving United Church pensioners with less and less buying power. At present there is no 'cost of living' increment in United Church Pensions. If no action is taken to help supplement UC pensions, in 10 years, Pension Plan members could see their buying power reduced by another 15% for a total of 30% less purchasing power. The Pension Plan is fully funded on a going forward, solvency, and wind up basis as of the last actuarial valuation. Since the number of pensioners (approximately 4,500) is greater than the number of active members (about 3,500), the Plan is largely dependent upon market conditions to improve its funded status. Two decades of low interest rates and uneven markets have revealed the vulnerability of this funding model: the Pension Plan has not been able to protect its members from inflation. As pension law currently stands, there are restrictions on adding funds to a multiemployer pension plan such as ours. However with some creativity, other methods of Page 3 of 14

4 supplementing retirement pensions could be developed. We imagine money accumulating in a restricted use fund until a method of augmenting pensions is developed. Just as 'outside of the box thinking' was used to supplement pre 1955 pensions through the church's Venture in Mission campaign, now is the time for more 'outside of the box' thinking to supplement retirement pensions. Pensioners report that their monthly pension benefit from the UCC Pension Plan after a thirty plus year career in the United Church is typically 35% 45% of their preretirement earnings (including housing allowance), making retirement precarious and tense for many Pension Plan members. 3. How might the General Council respond to the issue? We propose that pastoral charges being served by retired ministry personnel be required to pay into a restricted use fund of the United Church of Canada the equivalent amount towards pensions of pastoral charges being served by non retired ministry personnel. The fund will be used to supplement pension benefits for both current and future members of the Pension Plan once it is large enough and a distribution policy has been developed. The fund will remain in place as long as the Pension Plan exists. Page 4 of 14

5 BC 2 CONCERN OVER PRESENT AND FUTURE UNITED CHURCH PENSIONERS Origin: British Columbia Conference 1. What is the issue? The United Church Pension Plan was established to help provide security to pensioners. It is funded by contributions from employees and employers. Current pensioners have lost 15% of their purchasing power since 2008, because no cost of living increases have been possible. If inflation continues to erode the value of pensions, retired ministers and lay employees will suffer further loss and experience significant hardship. The Pension Board has labored diligently and with great wisdom to keep the pension plan solvent. The plan is currently able to meet all of its pension obligations. However, the amount of money in the plan would have to increase greatly in order for any increases in pension payments to be possible. The Pension Board has raised employee and employer contributions significantly and has reduced the rate at which pension credits accrue. There are no other tools available to the Pension Board. 2. Why is this issue important? The United Church of Canada and its employees covenanted together to contribute to the pension fund. At one time, ordinands could not be recommended for ordination until they had signed the pension covenant. Our denomination has a solemn responsibility to do all within its power to see that present and future pensioners have adequate income. If no action is taken, United Church retirees face a dismal future. 3. How might the General Council respond to the issue? The General Council could establish a fund separate from the Pension Plan, which would offer supplements based on need, to retired employees. This could possibly be funded by contributions from Conferences from the proceeds from the sale of assets of congregations which have ceased to exist. The General Council could seek funding to improve health benefits for pensioners and also seek funding to fully cover pensioners benefit contributions. The General Council could lobby the Province of Ontario, where the UCC pension plan is held, to allow lump sum contributions to pension plans as was previously allowed. Sources of funding for lump sum contributions could be sought and, if allowed by the Government of Ontario, provide much needed financial help to the pension fund. Page 5 of 14

6 SK 4 FAIR PENSION OUTCOMES Origin: Saskatchewan Conference 1. What is the issue? When calculating the annual pension payment to retirees who begin ministry calls / appointments in 2018 and accumulate thirty years of pensionable service in The United Church of Canada, there is a significant detriment to pension remuneration for those ministry personnel who have had calls / appointments for those 30 years in Cost of Living (COL) groups 1 3 as compared with the pension remuneration for those who have been in calls / appointments in COL groups 4 6 for those 30 years. Additionally, ministry personnel serving in ministries that provide a manse over those 30 years of service also accrue more pension than those in COL groups 1 3 under the new compensation system regardless of in which COL group region the manse is located. (see table below) Years of Service Pension Accrued/annual 1 COL 1 30 $25, COL 3 30 $28, COL 6 30 $34, Lives in a manse 30 $29, (See appended full tables of pension calculations on which the above summary is based.) Prior to the new compensation model which set to come into full effect July 1, 2018, all ministry personnel pensions were calculated based on pensionable earnings of 140% of salary (without housing allowance included), which remains the calculation for those ministry personnel with manses under the new compensation model, resulting in pensions for ministry personnel which were more equitable than will be the case under the new compensation model. 2. Why is this issue important? In the Song of Faith it states that "The church has not always lived up to its vision. It requires the Spirit to reorient it, helping it to live an emerging faith while honouring tradition, challenging it to live by grace rather than entitlement, for we are called to be a blessing to the earth." In a letter from the General Council's Ministry and Employment Unit dated March 5, 2015, a statement was made that "A regional cost of living is incorporated into the new minimum, eliminating a separately identifiable housing allowance (letter attached). Pensionable earnings will equal 100% of this new comprehensive salary. Ministry personnel who have had relatively low housing allowances will notice that moving to this new way of determining pensionable earnings may result in a decrease in the pension Page 6 of 14

7 contribution they and their pastoral charges make as well as in the amount of pension earned. On the other hand, ministry personnel who have had relatively high housing allowances may notice that the pension contribution they and their pastoral charge make will increase as well as the amount of pension earned." Urban pastoral charges and those pastoral charges in higher cost of living (COL) groups tend to have more success in attracting ministry personnel for calls or appointments than do rural/remote pastoral charges in lower COL groups. The United Church of Canada has had a long history of being a church that strives for justice for all people and prior to the 2015 introduction of the new compensation model, pension accrual for ministry personnel was calculated more equitably. Those ministry personnel who may feel called to rural/remote pastoral charges will now have to assess if they can afford to take calls/appointments based on the detrimental pension consequences and the probability that as they age they will likely need to relocate to a larger town/city where health care and other amenities for seniors are available but where housing will also be more expensive. There is already a shortage of ministry personnel for the vacancies in rural/remote pastoral charges across The United Church of Canada, especially ANW, SK, MNWO, and NF/LAB Conferences, and this move to greater inequity in pensions for ministry personnel will likely cause fewer to consider calls/appointments to these rural/remote pastoral charges. 3. How might the General Council respond to the issue? We propose that the General Council direct the Pension Board and the Ministry and Employment Unit to find a way that pension accrued earnings for ministry personnel across all the COL groups under the new compensation model are made more equal. 4. For the courts transmitting this proposal to the General Council: Are there comments, affirmations, suggestions you would like to make with respect to this proposal? No. Appended Full Tables of Pension Calculation Scenarios *Assumptions for each of the following pension calculation scenarios: Co1 1 -A progressing to F no break in pensionable service applied 1% salary increase Note: Pension starts below age 65 - discount factor applies Pension starts after age 65 - service below age 65 is entitled to postponement factor Page 7 of 14

8 PENSION CALCULATION SCENARIO Cost of Living Group 1 Rate Pensionable Earnings Accrual Service Year Total Service Category , A , A , B , B , C , C , C , D , D , D , E , E , E , F , F , F , F , F , F , F , F , F , F , F , F , F , F , F , , F , , F Total Annual Pension at age 65 25, Page 8 of 14

9 PENSION CALCULATION SCENARIO Cost of Living Group 3 Rate Pensionable Earnings Accrual Service Year Total Service Category , A , A , B , B , C , C , C , D , D , D , E , E , E , F , F , F , F , F , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F Total Annual Pension at age 65 28, Page 9 of 14

10 PENSION CALCULATION SCENARIO Cost of Living Group 6 Rate Pensionable Earnings Accrual Service Year total Service Category , A , A , B , B , , C , , C , , C , , D , , D , , D , , E , , E , , E , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F Total Annual Pension at age 65 34, Page 10 of 14

11 PENSION CALCULATION SCENARIO Living in a Manse (Calculation based on 140% of salary) Total Rate Salary Accrual Service Year Service Category , A , A , B , B , C , C , C , D , D , D , E , E , E , F , F , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F , , F Total Annual Pension at age 65 29, Page 11 of 14

12 TOR 6 INFLATION AFFECTS PENSIONERS TOO: ADDING COST OF LIVING ALLOWANCE TO RETIREES PENSION AS WITH ACTIVE MEMBERS SALARY Origin: Toronto Conference 1. What is the issue? We propose that: pension plan members and stakeholders be surveyed on the question of adding a permanent cost of living allowance to the plan, as of a date to be determined, giving retirees the same benefit as that currently in place for active members. If there is substantial agreement to such implementation, the plan administrator will initiate this extended benefit as of the soonest possible date. 2. Why is this issue important? The plan text and goal currently states that protection against inflation erosion be made available when the administrator believes it is possible. The administrator has not felt it possible to undertake the traditional upgrade to pension benefits since 2009, thus eroding the benefits of retirees from that date, compared to active ministry personnel, by about 15% The policy for the minimum remuneration for Ministry Personnel, as active members of the plan, is to keep current with the annual inflation rate. There is definitely a cost to employing units as well as plan members if the cost of living allowance was added to the plan. This cost, in regards to employing units (pastoral charges), could be offset by grants from church funds, such as one created through the use of a portion of the proceeds of the sale of church property. The cost could also be borne by employing units (pastoral charges) as a way of offering justice to their staff and Ministry Personnel, equal to that being granted now, to active Ministry Personnel. This cost, in regards to active members of the plan could be defined by the plan s current actuarial advisors, at which point the membership, by survey or vote, could indicate their willingness to be protected against the inflation erosion currently being suffered by retired members for close to ten years. The administrator alone should not be asked to bear the brunt of criticism. The choice to fund cost of living allowances should come from those whom it will affect. Contributions to the plan since 2013 have already been increased with the effect of lowering the eventual pension benefits without the input of all parties. It is time to see if contributions may again be increased, but this time, with the effect of raising the eventual pension benefits. 3. How might the General Council respond to the issue? The 43rd General Council should direct that: 1. Just such a survey on the question of adding a permanent cost of living allowance to the plan be conducted for all pension members on a date to be determined, giving retirees the same benefit as that currently in place for active members. Page 12 of 14

13 2. And if there is substantial agreement to such implementation, that the plan administrator will initiate this extended benefit as of the soonest possible date. 4. For the body transmitting this proposal: Toronto Conference does not agree with the proposal entitled Inflation Affects Pensioners Too Adding Cost of Living Allowance to Retirees Pension as with Active Members Salary but is passing it on to the General Council for further consideration. With the following comments: We acknowledge the financial implications of increases to pension benefits, based on estimates provided by Mercer, the actuarial consultants for the Pension Plan: A catch up since the last ad hoc increase in 2009 would require an estimated $193 million to fund. A 1% annual indexing going forward would require $191 million to fund. The total estimated cost of these proposals is $384 million. The go forward indexing, alone, not including the catch up, would require that member and employer contributions increase from the current total of 15% of pensionable earnings (6% members and 9% employers) to approximately 24.5%. We acknowledge that the General Council has no authority to direct or restrict how the General Council Executive, acting as the legal Administrator of the Pension Plan, exercises these duties. While surveying plan members is within the authority of the General Council to direct, the outcome of any survey cannot be binding on the Executive. At the same time, we acknowledge the justice issue that is raised in this proposal. We ask the General Council to join with us in expressing concern to the General Council Executive and the Pension Plan Board for United Church pension plan retirees who have not had an increase in pension benefits since 2009 and propose that affordable means to provide additional support or benefits to retirees be explored. The Permanent Committee on Governance and Agenda proposes: That the Executive of the General Council: 1) express concern for United Church pension plan retirees who have not had an increase in pension benefits since 2009, and 2) direct the General Secretary to work with the Pension Board to consider all of the possibilities outlined in proposals BC 02, HAM 02, HAM 03, SK 04, and TOR 06 and explore any affordable means to provide additional support or benefits to retirees and report back to the Executive in the fall of Page 13 of 14

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