October 17, 2008
By Mary Frances Schjonberg

Despite the past six weeks of world financial turmoil that has led to what some observers are calling "wealth destruction," the president of the Episcopal Church's Church Pension Group said October 16 that active and retired participants need not worry about their benefits.

On a day when the Dow Jones Industrial Average swung nearly 800 points, T. Dennis Sullivan acknowledged that "we're not immune to what is going on in the market," but emphasized that "benefits are fully secure."

Sullivan's sentiments echoed an October 2 letter he sent to clergy receiving benefits from the Church Pension Fund, which is part of the pension group that also includes the church publishing company and insurance products.

"The fund's financial condition remains very strong, with assets well in excess of liabilities," Sullivan wrote. "The Clergy Pension Plan maintains substantial reserves, and the recent volatility does not begin to call into question the soundness of the fund. The pension benefits of the Clergy Pension Plan are fully secure."

On March 31, 2008 (the end of CPG's fiscal year), the Pension Fund needed $5.1 billion available to fully fund present and future clergy pension, life insurance and medical benefits. It had nearly $8.9 billion in assets available for benefits, according to information on page 4 of CPG's annual report, online at http://download.cpg.org/home/about_us/pdf/2008AnnualReport.pdf. The $5.1 billion amount was based on actuarial projections and regulatory requirements.

CPG staff is current preparing its normal mid-year (September 30) report on assets available for benefits and Sullivan said the $8.9 billion figure will be "meaningfully lower," but "it's not going to change the basic situation" of having more than fully funded its liabilities.

"There's a lot of things to worry about in life but one thing that [active and retired clergy and their beneficiaries] don't have to worry about is the security of their pensions," Sullivan told ENS.

The surplus of assets available for benefits, Sullivan said, ought to "give the clergy of the Episcopal Church the confidence that their benefits will withstand this kind of market performance."

Sullivan also said that the liabilities of the defined-benefit plan CPG offers to lay employees of the Episcopal Church are fully funded. That plan, he said, it is "not as surplus-rich as the clergy's is."

CPG issued a short statement in September at the beginning of the financial upheavals assuring clergy participants and beneficiaries of the plan's soundness. At the same time, CPG's property and casualty insurance operations, known as collectively as Church Insurance, also said that it had no exposure to the financial calamity and government takeover facing American International Group (AIG), the world's largest insurance company.

Participation in CPG's defined-benefit pension plans for clergy and lay differs. CPG began as a clergy pension fund when it was chartered in 1914 (it became operational on March 1, 1917). Episcopal Church clergy are required to participate and their congregations or other TEC-affiliated organizations must pay an annual assessment into the fund. The assessment is 18 percent of the clergy person's annual compensation package (which generally includes cash salary, Social Security tax reimbursements, utilities, and housing, and may also include other items that are taxable under the Internal Revenue Service Code).

The assessments are pooled and invested as a whole, as opposed to being held in individual accounts for each participant.

The Clergy Pension Fund is known as a defined-benefit plan. Individual benefits are calculated based on years of credited service and highest average compensation, not the amount of money contributed on that person's behalf or on the performance of investments during the person's working life.

Clergy do not make contributions to the plan. They can invest in other CPG retirement savings funds that are similar to Individual Retirement Accounts, which have formed the basis for many people's retirement income after their employers stopped providing defined-benefit plans. Clergy earnings from those investments are determined by amount of contribution and market performance of their accounts.

TEC congregations and affiliated organizations are not required to provide pension benefits for their lay employees. TEC employers have the option of offering various pension benefit plans to their lay employees, including defined-benefit and defined-contribution plans designed by CPG specifically for lay employees. The employer contribution for the defined-benefit plan is 9 percent of an employee's eligible contribution.

CPG, acting on Resolution A125 from the 75th General Convention, is studying the feasibility of making lay pension benefits compulsory.

During the last fiscal year, the Church Pension Fund gave a 2.3 percent cost-of-living increase plus $10 per month to retired clergy and surviving spouses, dependent children receiving benefits and lay employees retired from the defined benefit plan. It also increased its subsidy for Medicare Supplemental insurance from $235 per month to $250, fully covering the cost of one of the three supplemental plans it offers and mitigating the cost increases in the other two.

Episcopal News Service
The Rev. Mary Frances Schjonberg is Episcopal Life Media correspondent for Episcopal Church governance, structure, and trends.