Ministers, Spouses, and Churches Get Dinged on New Pension Rules

Changes to the Christian Reformed Church’s ministers’ pension fund mean ministers must work until age 66 to collect full benefits, churches have to pay more, and ministers and their surviving spouses will receive less income.

The changes became necessary when Canadian pension regulators changed the rules for funding pension plans in 2008 after several employers went bankrupt, leaving employees without a promised pension.

The Canadian ministers’ pension plan is essentially solvent, but the new rules mean that it is now considered underfunded to the tune of $20 million.

After pension trustee appeals were rejected, government regulators issued an ultimatum: either come up with a plan to make up the $20 million within five years or the pension will be shut down.

The changes proposed by the pension trustees were approved by the CRC’s board of trustees in February, and letters of explanation went out to ministers and churches.

The plan now goes to Synod 2011 (the church’s annual leadership meeting) for approval. Since the plan could be shut down if it isn’t in place by July 1, approval by synod is highly likely.

Even though the U.S. and Canadian pension plans are two separate plans, the denomination is binational and the pension trustees want all CRC ministers to be treated equitably regardless of which country they call home.

Thus, changes apply to all ministers and all churches north and south of the border. These changes have no effect on current pensioners.

What it means for ministers and their spouses

The changes for ministers mean they must now work until age 66 to collect full pension benefits.

Also, for Canadians only, the final salary on which their pension will be based will be frozen at 2010 levels, regardless of wage increases in coming years.

If the minister works until age 66, the automatic benefit provided will now be paid only during his or her lifetime for a minimum of five years. However, if a couple elects to receive a pension that includes a survivor benefit for the spouse, the pension is automatically reduced by 10 percent of what it would have been. Under the old rules a survivor benefit was automatic.

In the example shown in the box, after the minister dies, the spouse could receive up to $3,400 less per year than under the old rules.

There is a spousal subsidy to be paid to all married ministers who retired before 2017. The payment will be paid to the minister or surviving spouse for a maximum of 10 years.

What it means for churches

In the CRC, churches pay for one hundred percent of ministers’ pensions.

The amount paid by churches will increase by 15 percent effective July 1. It is hoped that this will be the last contribution increase needed for several years.

For Canadian churches, that means an increase in the church budget of nearly $1,300 per year per minister.

For U.S. churches, it means an increase of approximately $1,000 per year per minister. That will raise a surplus of about $800,000 that will be transferred into the Canadian plan.

Additionally, the denomination will borrow up to $2.3 million against its Grand Rapids (Mich.) headquarters to help fund the Canadian shortfall.

In 2016, when the Canadian plan is once again considered fully funded, pension trustees and synod will have to decide whether to lower church payments or restore benefits or some combination thereof.

Example is based on a minister due to retire this year at age 65, after 39 years of service, whose final average salary is calculated at $48,763, with a spouse of similar age.

  Before July 1: After July 1:
Ministry couple’s annual pension income $25,398 $24,001
If couple opts for 66 2/3% survivor benefit $25,398* $21,601
Surviving spouse annual income $17,808 $14,401

*currently full pension is not reduced for survivor benefit

Example is for illustrative purposes only

About the Author

Gayla Postma is news editor for The Banner.

See comments (16)

Comments

I've heard tht quite a number of ministers are retiring a little bit early in order to lock in their benefits at June 30, 2011 levels? I'm wondering if the MPP office can let us know how much of this is taking place - and I'm wondering what impact this is having on churches? Some more reporting on this would be helpful - quotes from pastors, churches, etc.

since when do we fold to a neighboring goverment, do our people suddenly bend to support another goverment decision at their expense, sounds like some thing out of Washington DC.

The retirement age should be raised to 70. Age 66 is not an aggressive enough change!

I think it is important to make sure that our pastor's and their spouses have a sufficient source of income in retirement. I also wonder how much the CRC spends in overhead expense with the pension plan.

So we have other retirement plans in addition to the pension that are available to the pastors.

WOuld it ever make financial sense to eliminate the pension plan give the pastors and their spouses some freedom to make investment choices on their own with individual plans?

Canada is not a neighboring government.

Your numbers are (as usual) not accurate.

A pastor who retired at age 66 (not 65) as of the end of January 2011 with 40+ years of service receives $24,816.

A pastor with 39 years service retiring at age 65 would receive less... more like $23,600 (or less), not the $25,400 as reported.

It doesn't take that much work to report accurate numbers.

No mention in this article about moving away from pensions in general. Of course most private employers and even many governmental entities are now moving away from pensions. They are costly, leave the employer with significant legacy costs based on uncertain future events (like inflation, or poor returns on investments). 401k's, 403b's and the the like also give the ministers a lot of benefits - no survivor issues as the money is all theirs. No time limitations, as mentioned in the article and better age limitations (can draw at 59.5 years old for example). Pensions are poor retirement vehicles for many reasons that I've mentioned, and many more as well. Why not consider starting new pastors in 403b's (or whatever the right one is) and not putting the future finances of our denomination in jeopardy while giving pastors and their families a much more flexible investment vehicle?

All numbers presented in this article were provided and verified by CRCNA director of finance John Bolt. Questions regarding specific numbers or specific retirement scenarios should be addressed to him (jbolt@crcna.org) or the pension office.

Gayla Postma, News Editor

The calculation in the example was for a Canadian minister.

If you have pension related questions, please call us at 616-224-0722 or email pension@crcna.org.

Regrettably, info provided by the Pension Office for this article, raises as many questions as it answers.
What does the change mean for current pensioners both in Canada and the US? And are US pension rules/provisions really determined or governed by the Canadian government?

The changes to the pension plan have no effect on current pensioners. Because that is the case, I didn't mention it in the article, but I regret any distress that may have caused current pensioners. Regarding U.S. pension provisions, it was the decision of the pension board and subsequently the board of trustees to change the provisions of the U.S. plan to accommodate the changes required in the Canadian plan, so that ministers on both sides of the border are treated equitably.

It is an injustice that the entire denomination will have to pay interest for a 2.3 million debt due to rule changes in Canada. When will the next changes occur...
However, we can not trust individual churches to fund their pastors IRA accounts or 403c. It just will not happen because building programs are a lot more interesting.

I am not numbers guy. But something stands out to me. Canada is doing economically better than the rest of the world in the midst of our global economic melt down (that is at least for today, who knows about tomorrow). It seems to me that the decisions (possibly wisdom, possibly luck) of our Canadian banks and our government may have something to do with it. Again, I'm not a number guy or claim to understand pension funds, just my observation about Canada.

I too agree that the US pastors should not have to bail out the Canadian fund. This should be the responsiblity of the Canadian church. The figures that are given really aren't that bad and maybe US pastors should not complain. I retired in 2002 after 41 years in the ministry. The formula that was used to calculate my pension was in a way different from those who will retire today. After 41 years of service my pension is only $18,288 Go figure!

Canadian regulators changed the rules in order to protect the future pensions of employees and, in doing so, it was discovered that the Canadian side of the CRC pension plan is underfunded. Perhaps if this "Canadian" system of pension scrutinization was also applied to the US fund, it too would be deemed underfunded. And, if that were so, we'd be forced to contribute to both sides of the pension pool but we'd be protecting our employees and honouring our employment contracts with them.

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