Synod Approves Pension Plan Changes

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Facing limited options, synod delegates today approved increasing the normal retirement age for Christian Reformed pastors from 65 to 66, decreasing benefits available for early retirement, changing the cost of spousal benefits, and increasing the contributions churches must make to the Ministers’ Pension Fund.
 
The changes come as pension trustees grapple with Canadian regulatory changes. In addition, significant losses from the 2008-2009 market crash, coupled with decisions of earlier synods that increased retirement benefits, together pose more problems for trustees.
 
Changes in regulatory oversight north of the border forced the most dramatic changes to the pension plans. Rather than allowing underfunded liabilities of the plan to be met over a 15-year horizon, regulators now demand that the plan be fully funded within five years. Delegates heard that a viable strategy was required by July 1, 2011, or the plan would be dissolved by Canadian regulators.
 
The funded status of the plans was impacted in large part by the market downturn of 2008-2009, as well as the significant benefit improvements granted by synods in 1999 and 2001. Those synods significantly increased total payment levels and early retirement benefits, and made the increases retroactive to 1985. These were, as synod heard today from the CRC’s director of finance, “huge benefit improvements done in those two years.”
 
In addition to the benefit adjustments, churches across the denomination must now add 15 percent to their pension contributions. Short-term borrowing will cover the rest of the shortfall. It is anticipated that the plan will be deemed solvent in 2015, at which time the pension trustees and synod will review the situation. None of this synod’s changes affect current pension recipients, only those who retire after June 30, 2011.
 
One elder delegate, Walter Neutel from Eastern Canada, proposed a fundraising campaign for the Ministers’ Pension Fund. “To put all the burden on ministers and their spouses is not entirely fair. I hope we look at these as interim measures,” he said.

See also Ministers, Spouses, and Churches Get Dinged on New Pension Rules.

For more coverage while synod is in session, including webcast, photos, discussion forum, reports, and more, visit the Synod 2011 website.

About the Author

Dan Postma is an occasional reporter for The Banner.

See comments (6)

Comments

Hey Dan,

Nice article.

I, as a young Minister, am not counting on receiving a CRC pension when I retire. I just don't see how there is going to be anything left by the time I turn 66.

I personally think that the CRC should, a quickly and smoothly as possible, get out of the pension business.

We need to start making calculated decisions that will allow a much smaller CRC to flourish in the future. I don't think the CRC will die in my generation, but I do think that we need to prepare for it to get smaller.

That sounds pessimistic... I'm really not that pessimistic.

Peace
David

Realities of financing pension plans are complicated. Wait until Canadian pastors finally figure out that the calculation of their pension payout is based on the last three years of all Can. pastors' average salaries MINUS "HOUSING ALLOWANCE" AMOUNTS, which of course in Canada is acutally referring to the Clergy Residence Deduction which saves a pastor maybe 3-5 thousand in taxes based on what you live in, not the 10- 20 thousand in so called housing allowance that a church might designate as such. By the way, when a Canadian pastor retires he is no longer eligible for a clergy res. deduction, and no one is going to give a retired pastor a housing allowance to add to their retirement income. Anyone else out there have a company pension that deducts the amount they think you are spending on the house you live in from you income before they calculate your pension amount based on that income? Time to get up to speed with Revenue Canada and change our church's language and perceptions. There is no such thing as a housing allowance whose amount is set by the church. The only relevant number for Rev. Can. is the market or actual rental value of the house you live in. And that amount is used in a formula to reduce the amount of income tax a pastor pays up to certain limits. Nothing to do with the amount a church wants to designate. So really, reporting a "housing allowance" on the ministers' compensation survery simply makes the pension plan ingnore the part of your salary that you used to pay for a home to live in and then calculates the salary amount that the pension is going to pay you from what the reduced amount is. I don't receive a housing allowance. I receive a salary and a portion of my income is tax exempt, just as it is if I claim school tuition, or make donations. So either the pension plan is really more underfunded than we are thinking or the payout is a lower percentage than we are saying it is of the average last 3 years of service of all pastors. Anyone else notice this?

Ministers in the CRC are well paid with their wages, housing allowances, fully paid pensions as well as other allowances. Most are tax free and for a person in the pew who has all income recorded and has no tax free allowances, the equivalent earning will be in excess of $100,000. If the Minister's Pension Fund needs more money to sutain itself, have the ministers pay an equal share to their respective pesnions.

Al Brander
High River, AB

I agree completely with Mr. Neutel. We,as members of the CRC, have hired Pastors and have promised them a salary with benefits. I fully realize that our pastors have not accepted God's call "for the money". Their level of post-secondary education could have achieved far greater remuneration in other fields. We promised our pastors a level of support and we haven't been able to achieve that. We, as recipients of the services that the pastors provide, should contribute directly to the shortfall and I suspect that "special offerings" on a quarterly basis with proper education as to the reason for the fundraising would be a great start to our fulfillment of a promise made to our clergy. Those who don't fully appreciate the blessing provided by pastors (or are unable to contribute) are then free to keep their wallet in their pocket or purse.

Also, I wonder what evaluation the American side of this pension fund would receive if the same level of intense scrutiny were applied as was to the Canadian fund. Perhaps Canadians are too particular but, then again, the more intense scrutiny of who qualifies for mortgages in Canada has saved the Canadian economy from much of the economic chaos suffered south of the border. Would it be stewardly to re-evaluate the American side of the pension fund in the same manner?

@ David S. I concur fully. The Pension system is from a bygone era - it is well intentioned but unsustainable. Those of us who are young and working can plan no income from the Social Security System in the US and no income from the Pension system from the Denomination. While I want to support those who have gone before me and help them enjoy retirement without cumbersome financial obligations - forcing all ministers into the system is not the answer. We should adopt Mr. Neutel's proposal - to raise the benefits for the soon and currently retired members, then rapidly faze out of the Pension system. All pastors should be required to take a personal finance and church finance class as part of seminary education, and the denomination should develop a system to approve sound investors to give pastors advice.

@ Al. Ministers in the CRC are paid adequately. We do not want for much. However, if you take the $100,000 that number includes health insurance. Unless a person is a small business owner or self-employed, health insurance is included as part of the salary package. Remove the health insurance from the pastor's overall package and the salary is significantly lower. While I have no problem with individual pastors planning for their retirement (which is the gist of your argument), currently CRC pastors are forced into the pension system per Synod Rules. As a denomination we have adopted a pension system, therefore we are all responsible to care for the retired and soon-to-be retired members of our denomination unless we make a change away from the pension system.

@Todd Hilkemman; @David S.

Bear in mind that one of the reasons for a denominationally funded pension plan is to ensure that pastors who are called to serve smaller, less affluent congregations are not penalized by that service. It is a valid concern and a valid way of addressing it.

The biggest problem is that the pension fund is a "defined benefit" fund rather than a "defined contribution" fund. It specifies a benefit, and then has to come up with a way to pay for it even though markets fluxuate significantly. It is extremely difficult to maintain an actuarially sound defined benefit plan.

A defined contribution fund is more appropriate. The denomination says they will contribute a specified amount to an individual's retirement savings (often adding matching contributions to the individual's own retirement savings as a way of encouraging them to save, too), and then offers the individual various investment options that vary by risk/return ratio. Since the benefit is the savings, not a promised salary upon retirement, it's much easier to deal with changing investment and economic pictures, but it does place a greater burden on the individual.

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