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PC(USA) pension plan remains fully funded

But investment losses mean no ‘experience apportionment’ in 2009

April 8, 2009

PHILADELPHIA

The pension plan of the Presbyterian Church (U.S.A.)’s Board of Pensions (BOP) remains fully-funded despite investment losses of 28.6 percent in 2008, board members were told at their recent meeting here.

From a high of $7.9 billion in 2007, the board’s balanced portfolio declined to $5.4 billion at the end of 2008, according to Michael F. Fallon Jr., the board’s vice president for finance.

“Twice in my 10 years here, we’ve gone through $2 billion as a result of market fluctuations,” noted BOP President and CEO Robert Maggs. “That we are able to continue to fully fund benefits plans for our members indicates that the answer to the question, ‘Do we have too much in our reserve balances?’ as we frequently ask ourselves, is ‘No.’”  

The losses do mean, however, that no “experience apportionment” ― a percentage increase in retired members’ pensions and in active members’ pension credits ― will be granted for 2009.

“Although promised plan benefits remain secure, we must be prudent, providing careful stewardship of resources so that we can both meet present needs and protect future benefits,” said Donald Fleischer, chair of the BOP’s Pension Committee. “Members count on us to preserve the long-term financial health of these plans.”

Investment Committee chair Thomas Jennings said he thinks growth “will start to return to the U.S. economy in the second half of this year” and that “inflation doesn’t look like it will be a problem.” However, he added, “A turnaround is not going to be rapid.”

The Investment Committee “is not panicked and our plan is funded enough to take care of the needs of all plan members,” Jennings said, noting that the committee reviews asset allocations at each of its thrice-annually meetings.

Judith D. Freyer, the BOP’s senior vice president, treasurer and chief investment officer  told the board that despite efforts over the last decade to reduce portfolio risk, increase liquidity and focus on superior long-term returns, “when global markets collapsed all investors, including those like us who didn’t invest in riskier and less liquid asset classes, felt the impact.”

Medical Plan reserves are “higher than expected,” Fallon told the board, and are projected to remain within the BOP’s target range at least through 2010. Medical Plan dues have not been raised for three years.

Medical actuary John Cookson told the board’s Healthcare Committee that the annual cost increase trend has been reduced from 9.75 percent to 8.75 percent, “due primarily to the Highmark PPO (Preferred Provider Organization).”

Patricia Haines, senior vice president for benefits, told the committee that “healthcare is relatively immune, historically, during recessions, but the magnitude of the current recession makes predictions impossible.”

The committee asked Cookson to prepare several financial scenarios for the Healthcare Plan, factoring lower salary increase trends (which would reduce dues income trends), the rise in disability claims, a decline in early retirements, and enrollment declines produced by the worsened economy.

As figuring out the healthcare system in the U.S. becomes increasingly complex, board members were briefed on the BOP’s new Member Advocate Initiative. Kelly Riley Brown, vice president  for member services, said the team of 15 member advocates will “help members navigate the complexities of the health care system and understand the Healthcare Plan completely.”

The “customer-centric” program, she added, “will help our plan members work through procedural and substantive claim issues in a way that maximizes value.”

The goal of the member advocate program, said Director of Member Services Annette Donald, “is to provide all members with encouragement, assistance and support and cultivate and expand effective communication.”

The team will also seek to collaborate with vendors, Donald said, “to identify trends and opportunities for better service at a better price.”

The most common problem areas, she said, are pre-certification for various tests and procedures, claim and payment denials, prescription drug problems, mostly involving generic substitutes, and hassles involving requests to see non-network providers.

In other business, the board:

  • Learned that the board’s Affiliated Benefits Program experienced 12 percent growth in 2008;
  • Approved a change in its Middle Governing Body Grants Program ― one-time grants to fund practical skills training (such as training programs in congregational and staff leadership, budgeting and financial management, strategic planning, or conflict resolution) for pastors who are members of the Benefits Plan and currently serving a PC(USA) congregation ― from 15 grants of $20,000 each to 10 grants of $15,000 each;
  • Explored how to further encourage the use of mail-order prescription drugs, which are a huge cost-saver;
  • Re-elected officers: Chair: the Rev. Jefferson K. Aiken Jr.; First vice-chair: Fleischer; Second vice-chair: Thomas C. Paisley Jr.

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