Thursday, May 31, 2012

BBT Board approves new funds for BFI clients and charts a course for Pension Plan.

Returning the Brethren Pension Plan’s Retirement Benefits Fund to fully funded status and approving five new tactical fund options for Brethren Foundation’s organizational clients were the primary focuses of the Brethren Benefit Trust (BBT) Board of Directors meeting on April 21-22 at the Church of the Brethren General Offices in Elgin, Ill.

The board also spent time approving lists of defense-related companies that will be kept out of BBT investments, evaluating the performance of the board, receiving an unqualified opinion from the organization’s auditor, and recognizing departing and nominated board members during the weekend-long meeting. But the Pension Plan’s Retirement Benefits Fund (RBF) was the primary focus of the board’s attention.

“Many pension plans across the country have experienced hardships in recent years,” said Nevin Dulabaum, president of BBT. “We’re not immune to those challenges. But we are steadfastly working to strengthen the RBF so that it can meet its obligations for the lifetimes of all current and future annuitants.”

The two-day assembly was preceded by several meetings of the board and its committees. A board conference call was held on Feb. 26, which allowed BBT board and staff members to review departmental reports and routine business. The Governance Committee met with Dulabaum in Lancaster, Pa., on April 12; the Property and Compliance task team met in Elgin on April 19; and the board’s Investment, Budget and Audit Review, and Governance Committees each met in Elgin on April 20.

Three studies offer insight and possible paths for the RBF

Since the recent economic crisis of 2008 and 2009 left the Pension Plan’s RBF at 68.5 percent funded as of Dec. 31, 2008, BBT’s highest priority has been to return that fund--which pays out all Pension Plan annuitants’ monthly benefits--to fully funded status.

Scott Douglas, director of Employee Benefits, led the board through reports from three studies that analyzed key components of Brethren Pension Plan. Although they were separate studies, their goals were the same--to provide information that will help safeguard the Brethren Pension Plan and the RBF for years to come.

One study was reviewed ahead of the full board meeting by the Investment Committee; prepared by investment consulting firm Marquette Associates, the study examined different economic and investment scenarios for returning the RBF to fully funded status. Based on these projections, it could take a decade or more to achieve this goal. Factors that contribute to the RBF’s funding status include the fluctuations of the investment markets, the number of new annuitants, the mortality experience of Pension Plan members, the spousal options that are selected, and the conversion rate used to determine how much money each annuitant will receive as a lifetime benefit.

Another study examined the mortality assumptions that BBT uses in its calculations of annuity payments. Human resources consulting firm Aon Hewitt put together a review of BBT’s current mortality assumptions and concluded that while the mortality table BBT uses is on target, it would be appropriate to switch to a different table in the future. The report made several other suggestions that the board’s Pension Plan task force will review at its next meeting.

A study commissioned each year by BBT examined the funded status of the RBF. The report indicated that as of Dec. 31, 2011, the RBF was 78 percent funded--meaning that for each dollar it must pay out to annuitants, it has 78 cents available. This is a 10 percent increase over its low, but it indicates that the task force’s work is not complete.

Tactical investments added to Foundation’s fund options

In response to requests from several current and prospective organizational clients, Brethren Foundation staff members have worked with the BFI Board and investment and client service counsel to develop a way to offer five goal-oriented investment choices. These new funds are composed of multiple BFI funds and are monitored by an investment adviser.

The five tactical funds are named after the purpose each is intended to serve--Aggressive Growth, Growth, Income and Growth, Income, and Conservative. The asset allocation of each of these funds will be evaluated on a regular basis, and changes will be made within an asset range defined by the BBT board. These changes will be made based on perceived opportunities within the capital markets. These funds will be available to all organizational clients for an additional fee.

“We’re pleased to be able to offer Foundation clients a way to simplify their allocation process,” said Steve Mason, director of BFI. “These five tactical funds will allow our clients greater ease in directing their investments toward specific goals.”

The board approved the addition of these five new funds to BFI’s 16 existing funds.

Lists of Defense-related companies used to screen investments approved by the Board

To honor the Church of the Brethren’s historic peace stance, BBT creates two lists each year of US Department of Defense contractors that either earned 10 percent or more of their income from defense contracts or hold one of the top 25 defense contracts issued to publicly traded companies. Companies that fall into these categories in the Department of Defense’s previous fiscal year are then prohibited from being included in any of BBT’s or BFI’s actively managed portfolios. The board approved the lists created for use in 2012 during Saturday’s session. These lists are available for review at www.brethrenbenefittrust.org/screening.

IR+M retained for another three years of investment management

Representatives of Income Research and Management (IR+M) presented a report to the Investment Committee during its meeting on Friday. IR+M is an investment management firm based in Boston that has been serving BBT as a fixed income manager since June 1995. After hearing the Committee’s recommendation to retain IR+M, the BBT board voted to retain the firm for another term. For the three-year period ending March 31, IR+M had a return of 10.2 percent for its Brethren Pension Plan portfolio, compared with the benchmark, Barclays Capital US Government/Credit Bond Index, which returned 7.1 percent in that same period. Each manager is reviewed every three years by the Investment Committee.

Orientation and governance session helped undergird the Board’s mission

To strengthen the performance and focus of the BBT board, Saturday’s morning session was dedicated to a time of board evaluation. The members discussed what it means to serve on the BBT board, and it reviewed an updated orientation and resource guide for new board members. This exercise was led by the Governance Committee, which has recently expanded its focus to include selecting BBT board nominees, orienting new members, pairing those new members with mentors from the board, and evaluating board members individually and collectively.

“We have an important mission--to provide BBT with solid leadership and support,” said Karen O. Crim, BBT board chairwoman. “As a board, we need to ensure that we are performing our duty to BBT’s members and clients effectively.”

In other news

An unqualified audit opinion of BBT’s financial reports, including Brethren Benefit Trust Inc. and Brethren Foundation Inc., was reviewed by the Budget and Audit Review Committee. Craig Resch, a partner at auditing firm Legacy Professionals, presented an overview of the audited financial statements. Board members then met with Resch in closed session. The audited financials were approved by the committee and the board.

Three positions on the BBT board are up for election or appointment this year, and the Governance Committee reviewed for the board the status of all three positions. One will be filled by Annual Conference election; the nominees for this slot are Eric Kabler of Johnstown, Pa., and Karen Pacheco of North Miami Beach, Fla. Pension Plan members have elected Tom McCracken of York, Pa., to represent the Fellowship of Brethren Homes for a four-year term. The BBT board in November had indicated it would appoint Ann Quay Davis of Covina, Calif., to serve another term on the board. Both appointments will be submitted for affirmation by Annual Conference delegates this summer.

The board and staff bid farewell and offered thanks to two departing board members--Jack Grim of East Berlin, Pa., who was previously elected by Annual Conference, and Michael Leiter of Boonsboro, Md., who was chosen to replace Carol Davis as the representative of the Fellowship of Brethren Homes in April 2010.

Upcoming BBT board meetings in 2012 will take place at the General Offices in Elgin, Ill., on Aug. 4-5 and at the General Offices and Pinecrest Community, a Brethren-affiliated retirement center in Mount Morris, Ill., on Nov. 17-18.

-- Brian Solem is coordinator of publications for Brethren Benefit Trust.

Source:5/31/2012 Newsline

No comments: