Brethren Pension Plan annuity rates are being assessed.

An actuarial report given to Brethren Benefit Trust (BBT) this fall showed that the Brethren Pension Plan’s Retirement Benefits Fund earlier this year dipped into territory it had not seen for many years, if ever--underfunded status.

For the past four years, the BBT board has wrestled with how to ensure that the Retirement Benefits Fund will be able to pay its liabilities decades from now. The board has now begun assessment of a change to Brethren Pension Plan annuity rates.

The underfunded status is believed to have been corrected with the strong growth of the investment markets in the second half of the year. But it was the result of two factors, according to BBT’s chief financial officer Darryl Deardorff: poor overall performance by the markets for the past five years, and the fact that payments given to Brethren Pension Plan annuitants are based on the actuarial assumption that the Retirement Benefits Fund can generate eight percent earnings on "Part A" monies.

In 2003, the board split funds contributed into the Brethren Pension Plan into "Part A" and "Part B" categories, because of concerns that BBT would not be able to offer an eight percent annuitization rate in perpetuity. Funds contributed prior to July 1, 2003, were placed in an "A account" and would receive an eight percent assumption rate when annuitized, although that rate could be changed by the board at any time. Funds contributed after that date have been placed in a "B account" and would receive a six percent assumption rate when annuitized, with the knowledge that the board would assess the rate annually.

In 2005, the board took a second step to undergird the Retirement Benefits Fund by creating a contingency fund to ensure the fund will meet its liabilities longterm.

Despite these two actions, the Retirement Benefits Fund dipped into underfunded status because investments simply were unable to achieve a sufficient rate of return to match the fund’s annuity rates, said Gail Habecker, chair of the Investment Committee. She reported that the problem is low market performance over the past five years, when the S&P 500 has averaged 0.5 percent of growth while most balanced funds have averaged slightly above 2.5 percent.

Habecker reported that staff have researched other Church Benefits Association members with similar pension plans, and found few offering a six percent annuity rate and none offering eight percent. Many Church Benefits Association members have moved to offering a four percent "floor rate" with a supplemental payment contingent on market performance.

In November, the BBT board considered a variety of options for the Brethren Pension Plan’s A and B accounts, but determined a decision could not be made before an up-to-date funding status is reviewed. That study, being conducted by Hewitt and Associates, is expected to be completed in mid-January. The BBT Investment Committee is scheduled to meet shortly thereafter to determine next steps.

The board approved allowing the Investment Committee to change the Plan A account annuity rate without further action by the full board, if the committee deems such an action to be appropriate following its analysis of the funding status report.

For more information about the Brethren Pension Plan, contact Brethren Benefit Trust at 888-832-1383 or go to www.brethren.org/bbt.

Source: 12/20/2006 Newsline