Wednesday, May 20, 2009

Brethren Benefit Trust makes changes to retiree annuity payments.

In order to preserve the solvency and long-term integrity of the Church of the Brethren Pension Plan’s Retirement Benefits Fund, which funds the monthly benefit payments for annuitants, the Brethren Benefit Trust (BBT) Board in April took action that will reduce annuity payments for retirees.

The board met at the Church of the Brethren General Offices the weekend of April 24-26 and wrestled with this difficult issue that will affect the lives of the Pension Plan’s annuitants.

According to an actuarial study conducted by Hewitt and Associates, as of Dec. 31, 2008, the Retirement Benefits Fund (RBF) had enough assets to meet only 68 percent of its longterm obligations. In spite of investment returns that have consistently outperformed market benchmarks, together with losses incurred due to market decline beginning in the last part of 2007, the 2008 losses in the stock and bond markets resulted in a 26 percent decline in the asset value of the RBF.

This is a $45 million shortfall and could seriously compromise the RBF’s ability to meet benefit obligations in the future. If corrective action is not taken as soon as possible, there is a high probability that the RBF will not be able to recover.

"BBT’s commitment as administrator of the Plan is to behave so that we can meet our obligations to all of our members throughout their lifetimes," said president Nevin Dulabaum.

Effective July 1, all new annuities will be calculated using an interest assumption rate of 5 percent, and the A and B accounts of active and inactive participants will be combined into one account. Effective Aug. 1, all existing annuities will be recalculated using an interest assumption rate of 5 percent.

Some annuitants may be surprised that the benefit amount can change, but according to the Church of the Brethren Pension Plan legal document, the board has the provision to "readjust annuities or other benefits where such changes are deemed by the Benefit Trust to be necessary to protect and preserve the actuarial and financial solvency of the Plan."

In addition, the funding of a special reserve account from the general assets of BBT (not the pension funds) will continue in an effort to bring the Retirement Benefits Fund to fully reserved status. The RBF will be considered fully reserved when the value of the RBF’s assets is at least 130 percent of the estimated liabilities. A plan will be developed for providing additional benefits to all participants when the funding status of the RBF permits such benefits without jeopardizing the RBF’s ability to meet its obligations.

The board is aware that a reduction in benefit amounts will create hardship for some annuitants. To counteract this hardship, the board and staff are implementing a simple grant program to provide relief to those annuitants who will suffer the most harm from a benefit reduction. The funding for these grants is not coming from the Pension Plan, but from BBT’s operating reserves, which are not normally used for this type of expense.

Details of the grant program and an application will be sent along with a letter to annuitants informing them of their recalculated monthly benefit--prior to the implementation of the new, reduced benefit. Eligibility criteria for these grants are intentionally being kept simple.

BBT is prepared to respond to the many questions and concerns that are likely to arise from these actions. Visit to learn more about the decisions and developments as they unfold. Plan members are also encouraged to contact BBT directly at 800-746-1505.

-- This article was provided by the communications staff of BBT.

Source: 5/20/2009 Newsline

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