With an impressive 17.1 percent return on investments for 2013, the Board of Pensions (BOP) of the Presbyterian Church (USA) voted to approve a 4.6 percent experience apportionment. The increase applies to all retired Pension Plan members and active plan members. It is equivalent to working one additional year. That means that every person who is currently receiving pension benefits and those who will one day receive benefits just got a 4.6 percent raise for perpetuity (beginning July 1, 2014). The board also increased disability benefits by 2 percent.
How can the board afford to be so generous? That question is answered by the 2013 performance of BOP investments which added more than $1 billion to the pension portfolio – which now exceeds $8.5 billion in assets under management.
Each year the BOP reviews the investment performance and using a formula based on benchmarks and reserve levels, considers whether or not to grant experience apportionments. The pension fund must maintain a minimum “funded status” of 110 percent. That means that the assets of the fund must exceed 110 percent of all present and future liabilities. The current funded status is 147 percent, or more than sufficient to accommodate the apportionment granted by the board.
The Medical Plan
The funded status of the Medical Benefits Plan of the BOP is another story. It is a self-insured plan and the dues collected each year must cover its own costs. The realities of the aging demographic that populate the medical plan, the plan’s membership decline, rising healthcare costs, and the self-insured nature of the plan, continue to challenge its viability. Added to that mix is the potential of competition with public and private healthcare exchanges as a part of the government’s healthcare plan.
The Healthcare Committee of the BOP spent considerable time learning about and accessing potential impacts of the Affordable Healthcare Act (AHA) as public and private exchanges come online. The representative from Price Waterhouse Cooper who has evaluated the impact of the AHA on the BOP plan reported that a high percentage of current plan members would qualify for subsidies were they free to choose insurance offered through an exchange. If all those who are not mandated into the plan (ie everyone who is not in an called/installed position in the PCUSA) were to leave the plan and opt to receive coverage through an exchange, the self-insured medical plan of the BOP would not be viable long-term.
The Board of Pensions and the General Assembly
The Board of Pensions board of directors also reviewed and approved the BOP’s responses to referrals from the General Assembly. Included in that discussion were items related to “divestment.”
The board was reminded by their chief counsel that their first responsibility in relationship to the funds entrusted to them for investment is fiduciary.
The BOP’s Manual of Operations expressly states, “All recommendations and actions shall be based solely on the fiduciary responsibility to act for the sole and exclusive benefit of the members and beneficiaries of the plans and programs administered by the Board of Pensions.” That means that even if the General Assembly votes in favor of divesting of certain stocks, the BOP is not obligated to do so.
The BOP governing documents go on to say, “The General Assembly of the Presbyterian Church (USA) may request boards and agencies of the church to divest or avoid the purchase of securities in specific industries. The Investment Committee, insofar as legally possible within its fiduciary responsibility, will comply with these requests. Current restrictions prohibit making investments in companies in the tobacco, alcohol, gambling and military-related industries, including the manufacture of handguns and land mines.”
The business before the GA this year includes efforts to add “for profit prisons” to this divestment list as well as specific companies including Caterpillar, Motorola Solutions and Hewlett Packard. Additionally, there are efforts to target 200 specific fossil fuel companies for immediate divestment but the Board of Pensions is recommending that this issue be referred to the denomination’s Mission Responsibility Through Investment committee (MRTI).
The tension between the board’s responsibility to its plan members and the “socially responsible investing” aspirations of some in the PCUSA are not always easy to align. Neither are a range of other challenging issues like:
- protecting the conscience of member churches who are paying medical plan dues that now extend to same-sex partners, or
- the denomination’s advocacy for single-payer national healthcare that would put the medical plan out of business, or
- the advocacy of the denomination for progressive tax reform (in the pdf scroll down to page 4, Roman numeral III) that would radically change the giving patterns of those who currently deduct charitable contributions to their churches – which in turn pay for their pastors’ medical and pension contributions, or
- the advocacy of the denomination against the preservation of the clergy housing allowance (via 1988 GA policy, “God Alone is Lord of the Conscience”) versus the Board of Pensions active participation in the Church Alliance amicus brief to the U.S. Supreme Court to preserve the allowance which is being attacked by the Freedom from Religion Foundation. The housing allowance is an integral part of the formula current pastors and all retired clergy depend on to make financial ends meet.
While none of those challenges is likely to be alleviated – and some may well be exacerbated by this year’s GA – a range of additional BOP related business is before the Assembly as well.
Overtures before the GA in which the Board of Pensions is specifically referenced include:
Overture 002 seeks to amend the Book of Order by adding a third paragraph to G-2.0504b which would read:
“For any temporary pastoral relationship filled by a non-retired teaching elder serving more than half time (20 hours per week), the contract must include participation in the benefits plan of the Presbyterian Church (USA), including both pension and medical coverage, or any successor plan approved by the General Assembly for the duration of the temporary pastoral relationship contract and future extensions.”
Overture 004 seeks “to direct the PCUSA Board of Pensions to remove and distribute all accumulated pension benefits as a lump check or electronic transfer within 120 days after a teaching elder or administrator, not yet retired, becomes ordained, commissioned, or affiliated with another faith denomination in the position as teaching elder, priest, pastor, minister, clergy, working as an administrator, or a leadership position within another denomination.”
Overture 008 asks the Assembly “to urge the Board of Pensions to post on the website the current list of the churches certified as Relief of Conscience churches.”
Overture 014 would:
1. “Instruct the Presbyterian Foundation and the Board of Pensions of the Presbyterian Church (USA), to disinvest from Caterpillar, Inc., Hewlett-Packard, and Motorola Solutions, in accord with our church’s decades-long socially responsible investment (SRI) history, and not to reinvest in these companies until the Mission Responsibility Through Investment Committee of the PCUSA is fully satisfied that product sales and services by these companies are no longer complicit in
a. the building and security of illegal Israeli settlements, which U.S. foreign policy, and most recent U.N. fact-finding mission determine to be an obstacle to peace;
b. the construction and maintenance of walls and fences that illegally encroach upon Palestinian lands, destroying Palestinian rights to own property and pursue livelihoods;
c. the management of checkpoints that dehumanize Palestinians and cut off innocent civilians from their property and natural resources;
d. contributing to and profiting from the relentless, five decade long, military occupation of the Palestinian territories.
2. Affirm that this action underlines the worsening situation in Palestine, calling attention to
a. the occupation of Palestine, which destroys lives and entire cultures, and for the sake of justice between Jews, Christians, and Muslims, that it needs to end;
b. the violation of Palestinian human rights; through home demolitions, constricting movement for work, school, personal needs, business, essential (and emergency) medical care; and the illegal mass political imprisonment of Palestinians;
c. the disproportionate impact on the Christian minority due to restrictions on family unification, housing, the isolation of Bethlehem and other conditions of occupation;
d. the failure to attract investors to Palestinian businesses choked by the occupation matrix, the blockade of Gaza, and restrictions on the West Bank economy, which adds more than 20 percent to business costs in Palestine.
3. Recognize that while the 220th General Assembly (2012) called upon the church to pursue only nonviolent investment in Palestine and Israel, we still profit from companies engaged in violent pursuits in Palestine, by providing equipment and materiel supporting illegal occupation, contrary to our church position.
4. Direct the Stated Clerk to:
a. Communicate this action to all other PCUSA councils and entities, and invite and strongly encourage those groups and organizations that hold assets in Caterpillar, Inc., Hewlett-Packard, and Motorola Solutions to disinvest as well.
b. Inform our ecumenical partners of this action, nationally and globally—particularly within Israel and Palestine—encouraging them to hear this witness and to also consider applying socially responsible, human rights criteria to other companies in their portfolios that are complicit in the occupation of Palestine.
5. Direct the Presbyterian Mission Agency and the Advisory Committee on Social Witness Policy to monitor developments in international law and related to the occupation, to continue to advocate conditioning foreign aid for Israel to compliance with humans rights law, and to support all measures designed to provide for viable statehood and a shared Jerusalem, including protection for Christian and Muslim as well as Jewish holy places.”
Overture 018 asks the assembly to,
1. “Express its profound concern about the destructive effects of climate change on all God’s creation. Climate change has had a disproportionate impact on those living in poverty and in the least developed countries, the elderly and children, and those least responsible for the emissions of greenhouse gases. The 221st General Assembly (2014) thus recognizes the moral mandate for humanity to shift to a sustainable energy plan in a way that is both just and compassionate. This mandate propels us to action as a denomination: to divest from the fossil fuel industry even as we reduce our use of fossil fuels and shrink our carbon footprint.
2. Call upon the Board of Pensions and the Presbyterian Church (USA) Foundation to
a. immediately stop any new investment in fossil fuel companies and instruct asset managers in their work for the denomination to do the same;
b. ensure that within five years none of its directly held or commingled assets includes holdings of either equities or corporate bonds in fossil fuel companies as determined by the Carbon Tracker list1; and
c. incorporate, into already existing financial reports, regular updates detailing progress made towards full divestment. These reports will be made available to the public.
3. Call upon the Stated Clerk of the PCUSA to inform those fossil fuel companies of the passage and implementation of this resolution.”
Overture 054 asks the Assembly “to direct the PCUSA Board of Pensions to study allowing small churches (less than 100 members) with pastors (serving less than twenty hours) to participate in the Benefits Plan of the Board of Pension based on one-half the median salary, namely $20,000 (instead of the current median salary of $40,000 presently required).”
You can read the full “Board Bulletin” for more information.
The Board of Pensions of the Presbyterian Church (USA) met in Philadelphia, Pa. February 27 – March 1, 2014.