Thursday, July 16, 2009

BBT reports progress in changing pension assumption rate.

Brethren Benefit Trust (BBT) has reported on its work to lower the annuity assumption rate for the Church of the Brethren Pension Plan, in a letter from BBT president Nevin Dulabaum sent in mid-June to all annuitants. The Pension Plan has provided retirement benefits to ministers and lay employees of the Church of the Brethren and its agencies since 1943.

The decision to lower the rate came in late April, in response to losses incurred because of the economic recession. The BBT Board approved the change of all past and future annuity assumption rates to 5 percent, a significant decrease from rates that have been in the range of 6 to 8 percent in recent years.

As of Dec. 31, 2008, the Retirement Benefits Fund held by BBT had enough assets to meet only 68 percent of its current obligations. The decision to reduce the assumption rate has been made in an effort to return the Retirement Benefits Fund to fully funded status. Returning the fund to fully funded status "is our first priority," BBT has stated on its website.

Monthly pension payments at the new rate will begin Sept. 1. An estimated 1,450 people will be affected. The group includes retired pastors, former district and denominational staff, and others who are receiving annuities.

"Based on our preliminary calculations, the reduction (in monthly payments) will be in the 15 to 20 percent range for most annuitants, but there are a number of variables that could have your individual rate falling above or below that range," Dulabaum wrote.

The organization has worked diligently to make this conversion accurately, the president reported. However, converting the rate for members who retired several decades ago, when calculations were made by an earlier computer system or by hand, has required much more work and a longer process than expected, he said.

BBT has employed three temporary staff to serve as a data compilation team. The team has had to pull paper files and worksheets dating back decades, and then input that information into a new computer database. The team also is researching and cross referencing other records and information to ensure that the figures used are accurate.

Hewitt Associates, a national employee benefits consultant, has been retained to compute the new monthly payments based on the 5 percent annuity assumption rate. Once that work is complete, BBT will send letters informing every annuitant of the amount of his or her new monthly benefit.

Retirees who experience great financial hardship because of the reduction will be able to apply for a new grant program. BBT has appropriated non-Pension Plan assets from its operating reserves to provide special assistance, up to the amount of the benefit reduction. The BBT Board will review and evaluate the grant program each year.

"We know that this process is difficult and that this change is a disappointment to you and to all of our Brethren Pension Plan annuitants," Dulabaum wrote in his letter. "We have also received support for making an extremely tough decision. Our first responsibility is to ensure that the Plan can cover its payments for decades to come."

He also noted that "the 5 percent rate to which we are moving is still on the high end of annuity assumption rates being offered today. While this news provides little consolation, it does help to put into context just how severe of a loss in equities we have gone through over the past 20 months.... This current downturn continues to present problems to all pension plans nationwide, whether church-based or secular."

For more information go to where BBT is offering an online link with answers to the most frequently asked questions about changes in the Pension Plan.

Source: 7/16/2009 Newsline

No comments: