Board of Pensions: no 2012 experience apportionment
Economy improves but not enough, officials say
March 28, 2012
For the fourth consecutive year, the Presbyterian Church (U.S.A.)’s Board of Pensions says it cannot afford an “experience apportionment” for Pension Plan members in 2012.
“The Pension Plan is fully funded to meet current liabilities,” said Frank James, III, chair of the Pension Committee, in a statement released by the board, “but there are insufficient excess reserves to grant an experience apportionment. The Committee requested I convey its collective regret that this is the case.”
An experience apportionment is a percentage increase in pension credits for active plan members and a percentage increase in pension benefits for retired plan members. Experience apportionments ― calculated on the basis of the BOP’s investment and actuarial experience and level of reserves ― are unique to the PC(USA) plan.
“Despite continued improvement in 2011,” James told the board at its March 1-3 meeting here, “Pension Plan reserves did not improve to the degree set by the Board’s experience apportionment policy.”
The board granted a disability benefit increase of 3 percent for disabled members receiving disability benefits on Dec. 31, 2011. This increase ― calculated differently from other BOP plans ― which takes effect July 1, 2012, will help offset the cost of inflation.
Investments: volatility is the word
The wildly fluctuating U.S. financial markets worked to the BOP’s favor in 2011…barely. Anne S. Drennan, chair of the Investment Committee, reported that the board’s balanced portfolio realized a 0.6 percent return for the year just ended.
She said performance for the first six months of 2011 was a positive 5.3 percent, followed by a negative return of 9.4 percent in the third quarter and a rebound of 5.5 percent in the fourth quarter of 2011.
At the end of the year, the portfolio had a market value of $6.8 billion.
Medical Plan: whither healthcare reform?
“Healthcare reform is the key driver,” Vice-President for Benefits Patricia Haines told the BOP’s Healthcare Committee. “The feedback has been generally positive for us.”
Michael J. Fallon, the board’s vice-president for finance and accounting, said, “At the end of the day the numbers tell the same story ― revenue is down and expenses are going up.”
The board’s Medical Plan finished 2011 with a net loss of $12.2 million, with enrollment declining 1.5 percent and expenses increasing 3.9 percent.
Nevertheless ― due in part to a Medical Plan dues increase of 0.75 percent in 2012 and another 0.75 percent in 2013 ― reserves stood at 40.1 percent of liabilities at the end of the year. Those reserves are projected to decline gradually over the next three to four years. Board policy requires a minimum reserve level of 20 percent.
“There has been very little negative feedback on the dues increase, though we know there’s worry out there in the church,” Haines said. “They seem to understand what we’re trying to do.”
The BOP has seemingly done an effective job of implementing provisions of the Affordable Care Act … and has received some federal subsidies that have helped many plan members.
The board has already implemented provisions extending care to the children of plan members up to age 26, removed lifetime benefit maximums for medical, surgical, and prescription drug coverage, and amended the plan to cover children younger than 19 who have pre-existing conditions, among others.
Staff has also made employers aware of and provided informational support for the Small Employer Healthcare Tax Credit, which for many churches has more than offset dues increases.
Other subsidies have enabled cost-savings in the BOP’s participation the federal Early Retiree Reinsurance Program, or ERRP, and Medicare Part D (by converting to Medicare Part D in 2011, the board qualified for a $10 million subsidy to help underwrite its program).
Complete information about the BOP’s efforts in response to healthcare reform is available at www.Pensions.org/healthcarereform.
Vendor contracts renewed
The board renewed its contract with:
- Highmark Blue Cross Blue Shield for Medical Plan administration
- Active Health Management for healthcare management services
- Cigna Mental Health for mental health services
- Express Scripts for prescription drug services
The board elected officers, who will serve from the conclusion of the upcoming 220th General Assembly (July 7) until the start of the board’s meeting on June 29, 2013. They are:
- Chair ― Thomas C. Paisley, Jr.
- First vice-chair ― John W. Hamm
- Second vice-chair ― Judith A. Harris