We welcome your questions related to logistics, legislation and budget. These questions and answers will help us prepare for a strong collaborative effort when we meet virtually this month.
An adjourned session is being held at the request of the council on finance and administration and concurred with by the cabinet to monitor the new 2021 budget and have three quarters of data to project the 2022 budget.
January 8, 2021 – A report was emailed to clergy and congregational leaders that includes a proposed plan, budget and recommendations for 2021 and beyond.
January 12, 2021 – Two information sessions (8:30 a.m. and 6:30 p.m.) were held for congregational leaders, clergy and annual conference members to go over the proposed plan and budget.
January 22, 2021 – A special annual conference session was held to review the plan and adopt any necessary budget changes.
February 1, 2021 – Billing statements emailed to congregations.
In 2020 I withdrew a motion proposing that 100% of proceeds from closed churches be used to build up the Retiree Health Care reserve. I have been assured now that 92% (Page 25 lines 38-46 and Page 28 lines 42-48) of such proceeds will be used for the next 3 years to build up that reserve. Considering that the proposed legislation calls for $1,732,000 (Page 25 line 36-46) of such proceeds to be used for current expenses before anything is allocated toward the Health Care Reserve, we are compelled to ask if we basing our plans on independent third-party actuarial calculations or in-house projections?
Our retiree healthcare liability model was reviewed and approved by CFA, BOP, Trustees, Centenary Fund and the Cabinet; all are committed to providing long-term, sustainable healthcare coverage to our retirees. Further, we reviewed the model with our third-party, actuarial partners at Wespath who commended us for our efforts and conservative assumptions. Another third-party actuarial service, Aon, is also in the process of completing their analysis of the long-term liability projections. Further, it is important to note that we believe our property sales projections are conservative. For example, the original 2021 budget assumed $490K would be deposited to the retiree health designated fund; you will see the latest projection in the model is now at $1.7M which we still may exceed based on recent sales (the amount is shown in the model in 2022 as explained in the answer to your next question below).
There are long-term plans being adopted by the proposed legislation. I’ve been assured that 92% of property sales proceeds as listed on (Page 25 line 43) will got or the Retiree Health Care Fund for 2022. The chart on page 40 indicates that the plan is to continue into 2023 and 2024, but where is the legislation that would confirm the projections in that chart, in order to assure this for 2023 and 2024?
a. We understand the confusion here and will further explain the model during the information sessions. 92% of investable property proceeds are committed to the retiree health care fund in 2021, 2022 and 2023. These funds are reflected in the retiree liability model in the beginning of the following year (2022, 2023 and 2024) as this is a more conservative approach to assume the sales all occur at year-end and the investment earnings begin at the start of the next year. In reality, deposits will be made to the retiree health care fund throughout the year the dollars are committed; hence, the earning would be higher than anticipated in the model.
b. The 2021 budget legislation presented at the January Special Annual Conference was admittedly not as clear as the 2022 budget legislation where we clearly commit the 92%. In 2021’s legislation, point # 4 simply states “ Use property sales and draw on reserves as approved in the budget.” In the details of the 2021 budget file which CFA approved, the allocation assumed the same as outlined in the 2022 Budget legislation.
c. While the 2023 budget legislation hasn’t been presented to the Annual Conference yet, the assumptions laid out in the retiree liability model were approved and committed to by CFA, BOP, Trustees, Centenary Fund and the Cabinet.
On page 25, on line 45 the following is printed, “$578,535 from GNJ designated funds.” There is no explanation regarding that statement. What is being proposed by that line?
The $578,535 is the 5% draw from the designated funds as laid out in the designated fund legislation and Policy & Procedures. The intent of establishing and building these funds is to lessen the burden of Shared Ministry income to support GNJ’s budget. As these funds grow, this draw will increase (up to 5%) and each fund will be used to support the respective expenses outlined in the legislation rather than fully relying on Shared Ministry.
On page 28, line 43, the description of the “Retiree Health Fund” makes reference to surplus from pre-82 pensions. Previously, we had heard that this surplus was exhausted. Is there a pre-82 surplus being held for GNJ at GBOPHB, or elsewhere? If so, what is the amount?
There is no current pre-82 surplus. Wespath completes an updated actuarial report on an annual basis which may result in future surpluses.
Where can I get/find the minutes of the two earlier 2021 sessions of Annual Conference?
Information from the previous two sessions can be found here.
You will also find two lists of FAQs here also.
The minutes will also be available in the Journal.
Is the Board of Pensions preserving the healthcare benefits for current retirees, as well as those retiring in the near future, who have not had the opportunity to invest their own funds before retirement which would have caused any shortages in coverage you are creating?
Yes, the Retiree healthcare benefit as well as the 2022 plan design changes will apply to current and future retirees.
In the description of impact for the Harvest Mission Fund, one of its purposes is defined as “allow(ing) GNJ to to achieve a 98% giving rate for shared ministry and billables.” How would this fund help to achieve that goal?
Answer is forthcoming.
What is PSR?
PSR stands for Past Service Rate and is used in the pre-82 pension calculations.
When a % is listed, a percent of what?
This question references the percentages found in the plan summary found on pages 38 & 39. The payment will vary based on the Service provided and how a doctor or facility submits the claim. The Adjourned Session Pre-Conference Workbook provides a snapshot of the cost of a number of the services.
As I recall, one of the principles regarding Retiree Health Coverage was that the health coverage provided in retirement would be comparable to that provided to Active Members. Is that still a principle?
The plans are not comparable as the Active plan offers six medical plans and Retirees are enrolled in a single plan. As an example of noncomparibility, five of the active plans have a $5,000 annual out of pocket maximum and one plan has a $6,000 out of pocket maximum. The Retiree plan will have a $2,500 out of pocket maximum in 2022.
Are doctors and other professionals in hospital covered at what rate?
The payment will vary based on the service provided and how a doctor or facility submits the claim. The Adjourned Session Pre-Conference Workbook provides a snapshot of the cost of a number of the services.
For various outpatient therapy, does the $40 refer to each visit or each prescription?
For outpatient therapy, the $40 co-pay applies to each visit.
So, for 10 physical therapy visits, the cost will be out of pocket? When an covered person reaches $2500 in annual expense, all other charges and copays are waived?
Yes, when the participant pays a total of the $2,500 annual maximum out of pocket, all other services are covered at 100%.
Are the healthcare plan webinars also going to include the retiree plan?
Yes, the Retiree Sessions are set for Oct. 26 at 10:00 a.m. and Oct. 27 at 2:00 p.m. Information will be shared soon.
How much of property sales will go Retiree Health Care costs?
92% of investable property sales in years 2021, 2022 and 2023; 15% is currently forecasted after steady state is reached.
Can you explain some more about item #5 please?
Item # 5 referred to here is from the 10/6/2021 Information Session budget presentation slide; it lists $578,535 from GNJ Designated Funds. This represents the 5% draw from the GNJ Designated Funds (listed in the related legislation) that goes towards the operating budget. The intent of the Designated Fund Legislation is to re-build these funds so as to make them a resourcing pool available to GNJ and thus reduce the burden on Shared Ministry collection.
How did the loss of reserves effect the budget?
GNJ’s financial situation was studied in depth and detailed plans were put in place to restore our finances. Our immediate actions included reducing GNJ expenses in 2021 and again in 2022, right-sizing local church billing subsidies in accordance with a five year plan and developing tighter policy and procedures around designated funds.
Will this information session be posted either on GNJ website or YouTube?
For the $13 million decrease in “change in fair value of investments” how much of that is a decrease in actual cash equivalents versus a decrease in the value of “real property” owned by the Conference?
The $13M referred to here is to be found on page 68 of the pre-conference journal, part of he CFA Five-Year Fund report (starting on pages 67) which is an analysis that first identified the total resources that needed to be accounted and then identified how the resources were consumed over the five year period 2015-2019. The $13M is the change in fair value of GNJ invested funds; nothing to do with real property.
With respect to the Retiree Health Fund, the description on page 57, line 36 makes reference to pre-82 surplus. We were previously led to believe this surplus was exhausted. And in Rob Zuckerman’s comments earlier, it sounds as though we owe $500K+ this year to fund a deficit in that fund. So what is the actual status of our pre-82 pension funding?
In 2021, there is no pre-82 surplus. We receive an updated actuarial report from Wespath on an annual basis where variables such as market performance are included. The $500K we owe in 2022 is due to what Wespath refers to as the “glide path” whereby they are changing the investment mix to more conservative investments due to the demographics on the pre-82 participants. This shift results in an assumption of lower return on investments (lower risk, lower reward) and a change in actuarial outlook. Hence, the need for a “catch-up” payment in order to remain adequately funded. Important to note that this glide-path change impacts all conferences, not just GNJ. Per the latest Wespath actuarial report received in September 2021, Pre-82 is at 97% funded as of 1/1/21 on a funding basis and assuming our normal PSR increase.
I was under the impression that we fund retiree healthcare from shared ministry. But this doesn’t seem to square with the reporting that shows from 2017-2019 we spent down the Retiree Health Fund by about $6M. The $6M is closely aligned to the approximately $2M/year run rate we loaded into the 2022 budget. This would seem to imply we funded most/all of the retiree health care from reserves. Is this correct?
You are correct – Retiree healthcare is budgeted to be covered through shared ministry collections. Unfortunately, whenever cash flow was an issue, the former CFO used designated funds to cover shortfalls. Given the fungibility of money, whenever there is a shortfall it is not possible to associate a specific expense with it. The Designated Fund Legislation and related Policies and Procedures are intended to ensure this does not happen again.
Will this change back once the churches reach 100% remittance of shared ministry? Page 57 Harvest Mission Fund purpose?
During the Information Session, a question was raised about the purpose of the Harvest Mission Fund and if the purpose of that fund would be changed to invest in new faith communities.
Per the funds outlined in the Designated Fund Report (page 57), the Strategic Disciple-Making (SDM) Fund has the express purpose to invest in new faith communities. We therefore anticipate moving forward with the Strategic Disciple-Making Fund investing in new faith communities.
That said, if the funds in the SDM Fund available to support the formation of new faith communities is insufficient, and if there are enough funds in the Harvest Mission Fund, it would be reasonable to reallocate funds from the Harvest Mission to SDM funds at that time.
Will coverage for pre 2021 retirees change?
The 2022 plan changes approved at the May session are for all retirees; a comparison of the plans can be found on pages 38 & 39 of the pre-conference journal.
Are each of these statements correct?
1) there is no premium contribution from retirees for now or 2022 or foreseeable future
2) 92% of property sales will go for retiree health care
3) The “maximum out of pocket” for the plan that is currently anticipated to take effect on 1/1/2022 will increase to $2,500 from the current $1,250 (a 100% increase–doubling)
4) The Centenary Fund will work to hold harmless any retiree or survivor who faces an “out of pocket payment” above $1,250
5) The Pensions Board will annually report the number (not identities) of annuitants who faced an out of pocket in excess of the $1,250 threshold
Each of these statements are correct with the following modifications:
# 2 – 92% of investable property proceeds (proceeds after the amount assumed in the operating budget); in 2021 we’ve already doubled the amount invested vs. budget expectations ($1M vs. a budget of $0.5M).
# 4 – In our conversations with the Centenary Fund board, they have affirmed that part of their mission is to provide support for our retirees and their spouses when they need help.
# 5 – We will provide the number of annuitants who exceeded MOOP if our carrier is able to provide it.
How are we defining “investable” sales versus the total that may be used for other operating expenses?
Investable Property Proceeds are property proceeds beyond the fixed amount approved by Annual Conference for the operating budget. The amounts approved for the operating budget are being used to help subsidize local church billings and is forecasted to be zero by 2025, possibly sooner.
Will the “92%” be reported as part of each budget presented to Annual Conference?
The 92% referenced here is the % of investable property proceeds that will be invested towards retiree healthcare (see the Budget Legislation, page 25, line 44 of the pre-conference journal). Yes, these % allocations will be specified as part of each budget presentation going forward.
Should we say “92% of sales up to $3(?) million”?
The 92% referenced here is the % of investable property proceeds which will be invested to retiree healthcare (see the Budget Legislation, page 25, line 44 of the pre-conference journal) and referenced in the question above. No, we should not put a cap on the amount invested into retiree healthcare fund. If the amount exceeds the budgeted amount, more will be invested helping the retiree fund grow faster. For example, in 2021, we budgeted for about $0.5M to be invested; we have already exceeded $1M.
The proposed amendment provides annual conference action. Why is that not a good thing?
The CFA/CBOPH joint response (pages 35 to 37) lays out all of the reasons why the boards recommends not adopting this amendment. The boards are committed to providing long-term, competitive healthcare to all retirees (current & future). The plan, as it previously existed, was not sustainable. When trying to find savings, the Board needs to evaluate all dimensions of healthcare coverage: Maximum Out of Pocket, Deductibles, Covered Services and Quality of the Carrier. Limiting one dimension could lead to an adverse impact on another dimension. For the approved 2022 plan, while the MOOP did increase, the Board was informed that less than five retirees exceeded it in 2021 and that the overall average out-of-pocket was only $52. Hence, the Board negotiated savings for the conference while trying to minimize the # of people impacted. Complex decisions like this are made best when they are studied by a specialized team free of constraints so they can then identify the optimal choice and make their recommendation to the Annual Conference for approval.
What is meant by “if there is a surplus”? And what will happen to money that is considered “surplus”?
This relates to the 2021 actual vs. budget … based on current trend, our income is trending higher while expenses are trending lower which would result in a budget surplus. If we do have a surplus, CFA will recommend what must be done with the surplus. At the moment, we expect it will be invested in the designated funds in the allocations presented in the budget legislation.
I think we all agree that the maximum out of pocket expense is not the only factor to consider in contracting for insurance, but in what way does the transparency and oversight called for in the amendment prohibit the committee from considering all the factors?
CBOPH continues to be very transparent about the decisions being made (including a detailed comparison of the 2022 vs. 2021 plan found on pages 38 & 39) and why they were made. The CFA/CBOPH joint response (pages 35 to 37) lays out all of the reasons why the boards recommends not adopting this amendment. The boards are committed to providing long-term, competitive healthcare to all retirees (current & future). The plan, as it previously existed, was not sustainable. When trying to find savings, the Board needs to evaluate all dimensions of healthcare coverage: Maximum Out of Pocket, Deductibles, Covered Services and Quality of the Carrier. Limiting one dimension could lead to an adverse impact on another dimension and result in suboptimal overall decisions. For the approved 2022 plan, while the MOOP did increase, the Board was informed that less than five retirees exceeded it in 2020 and that the overall average out-of-pocket was only $52. Hence, the Board negotiated savings for the conference while trying to minimize the # of people impacted.
Look at previous slide. The sentence re: rebalancing. It seems that 2020 is a typo?
It is not a typo. The designated fund legislation establishes the “opening balance” of each fund as of December 31, 2020 based on the actual available cash on hand at that time. At the time the allocation is actually done (due to delay in legislation), the activity during 2021 will roll forward using the legislations starting balance.
Why are there so many property sales?
This is a direct result of the difficult decisions to close churches; after which, the conference might need to sell.
How was the impact of the absence of PPP in 2022 reflected in the 90% projected?
It was not explicitly modeled. PPP will not be there, but COVID will be under much better control as well. We are comfortable with our assumptions based on the 2020 giving (despite COVID and the four month “holiday” from payments) rate and the 2021 trend.
Can you please revisit the statement that property sales are supporting UMCs with their billings. While I understand this statement conceptually, I am thinking of statements from GNJ in 2019-21 that they are no longer funding Billable deficits.
When we first discussed the subsidies in January, there was an $8,000 variance between GNJ’s actual healthcare per capita premium costs ($23,000) and the blended rate being charged to the churches ($15,000). Knowing our churches could not absorb the full $8,000 right away, we established a plan to continue to subsidize while gradually decreasing the subsidy amount to be at zero by 2025. With the savings the CBOPH realized in the active plans, we now expect the subsidy to be eliminated sooner, potentially by 2023 depending on the rate of healthcare cost increases.
What is the projected property sales for the next 10 years?
$3M per year conservatively. Expected property sale amount is $3.85M.
Harvest Fund balance in 2013 and 2014, what was for the disbursement of fund in 2015, 2016, 2017,2018 and 2019?
The CFA Five-Year Fund report (on pages 67 & 68 in the pre-conference journal) is an analysis of what resources needed to be accounted for and how they were consumed; the source of the analysis was the audited financials as these are the most reliable. Regrettably, due to challenging record keeping and supporting documentation, fund by fund analysis is very challenging particularly as the funds were comingled. This is why we need the Designated Fund legislation and related polices and procedures to be approved and implemented; this will segregate the funds and provide for tighter controls.
Where are savings from redistricting reflected in budget? What specifically went up? What is happening to district parsonages? DS houses?
DS parsonages that are no longer occupied will be sold. Comparing the 2022 vs. 2021 budget, total expenses are forecasted to decline $421K. The following are the main drivers:
Reductions: $1.6M in active/retiree healthcare costs, $0.5M in re-districting savings, $0.5M in COVID grants and $0.05M in misc. other.
These reductions are partially offset by non-controllable increases as follows: $1.0M in clergy retirement benefits (CRSP/CPP/UMPIP and pre-82 contribution), $0.65M in property & workers comp insurance (15% increase), $0.4M to return to in-person annual conference session and $0.175M for closed church maintenance/repairs.
For clarification, the Bishop spoke earlier today that the deduction of reserves was due to attempts to reduce local church billing obligations? Where does such expenditures show up in the the chart ? Were resources consumed?
The chart being referred to in this question can be found on page 68 of the pre-conference journal, part of he CFA Five-Year Fund report (starting on pages 67) which is an analysis of what resources needed to be accounted for and how they were consumed. The billing subsidies which contributed to depleting the reserves are the first three rows of the “How were resources consumed” section of the chart (Pension & Disability, Healthcare and Comprehensive Insurance subsidies).
What conflicts are not waivable by someone with a personal or familial interest? The need to recuse yourself does not seem to be clear.
Within GNJ, a conflict or appearance of conflict of interest occurs when an individual, be it the bishop, clergy, staff, laity, member of their family, business associate, spouse, significant other, domestic partner, and any additional employer or employee of a staff member, has direct or indirct financial, personal, legal or equitable interest in the outcome of a particular decision that they can influence. If such a conflict or appearnce of conflict exists, it should be reported as directed in the Conflict of Interest Policy. This would include any number of areas including hiring staff, making decisions about contractors or consultants, outsourcing work, making grants, etc. That said, there are some inherent potential conflicts of interest within the way the United Methodist Church operates. In the UMC, clergy and lay persons are financial beneficiaries of employment, benefit programs and grants offered by GNJ and on which they have voting power. Likewise, clergy and lay members of the annual conference vote on issues that affect their congregation’s budget and programming. If we consider the definition of conflict of interest, these situations could be considered to be conflicts of interest in that potential financial gain or loss could arise for an individual or a church as a result of decisions that are made. However, GNJ does expect clergy and lay members of annual conference to participate in discussions and vote on these matters and vote based on what is best for all members and all churches and in the best interest of meeting the overall mission, vision and financial goals of GNJ.
Has this policy, conflict of interest, been reviewed by our legal council?
Yes, our Conference Counsel has reviewed this Conflict of Interest policy.
As the projections for future years have been considered, has there been any consideration of the potential that congregations may seek to leave the denomination?
Disaffiliation of congregations were not factored into the retiree healthcare liability model. If a church did leave the denomination this would include a payment by the church for their share of the unfunded liability both in the the case of pensions and healthcare.
What are the current responsibilities of DSs in the new structure?
Responsibilities of DSs (a ministry of servant leadership, general oversight and supervision) will remain the same as it is written in ¶ 403. The numbers of churches in each districts will increase from around 55-60 to 80-85. DSs will do a focused strategic resourcing with the help of circuit elders and resource directors.
How does reducing Superintendents and districts help churches fulfill the mission? Or is this just a cost saving measure?
Regional structure along with redistricting plan has been reorganized to serve pastors and churches in the most effective way. District Superintendent, regional directors, and circuit elders will work more closely with pastors and local churches as they resource them through Journey of Hope Plan and Leadership Academy. Clergy coaching and pace groups will also still be offered as in the past. Of course, we expect to save about $475,000 annually by reducing districts.
Are the helping elders paid or volunteer? Are they pastors with their own congregations?
The correct term is circuit elders who are given stipends for the work they do with local congregations in connection with the District Superintendent and regional teams. These pastor’s do serve under appointment to a congregation along with helping other congregations grow in their vitality markers.
Have we recovered the unfunded liability from our closed churches? Where does that show in our reports?
We requested an opinion from Wespath, the authors of paragraph 1504.23, who advised that the intent of this paragraph is to be applied to a church that disaffiliates via closure, not closures for lack of sustainability. To date, GNJ has not had any closures where we felt this calculation was warranted. Recognizing that churches which close for lack of sustainability may have very small unfunded liability, we will forward the question to CFA for further consideration and report at the May 2022 Annual Conference any proposed change to this application which is in line with the goals of the Designated Fund Legislation to lessen the burden on Shared Ministry collection for the operating budget, fund ongoing mission and ministry and fund our long-term retiree liabilities.
When is the last time we solicited bids and considered changing vendors for active and retiree health care? Are we working directly with Wespath, or are they advising us on our negotiations with others?
The BoPHB worked directly with our Consultants at Willis Towers Watson. Prior to shifting to the HealthFlex Exchange with Wespath Benefits and Investments for active participants in 2021, WTW reached out to several carriers. Ultimately, it was decided the HealthFlex Exchange was the best option with the offering of six medical plans, three dental plans, and three vision plans. This offering of multiple plans provides a variety of options so participants may choose the best fit for their family needs.
Willis Towers Watson researched retiree plans in 2021. The Board felt that the plan design changes United Healthcare offered was the most competitive plan, minimizing the disruption to the participants rather than shifting to a new carrier in 2022.
In response to the answer to the last question in the FAQ, I must ask, “Upon what authority in the Book of Discipline does Wespath have the right to make legal determinations for the denomination that ignore clearly stated rules adopted by General Conference?”
1. Since 1504.23 clearly includes collecting unfunded liability from churches that experience “closure” and not just those that that “disaffiliate”, so are we now learning that our conference has ignored that paragraph in the Book of Discipline, and thus not collected such funds from closed church sales and has not set them aside? 2. Doesn’t this mean the whole budget is based on numbers that should have included funds from closed churches? 3. Does that make the whole budget out of order until this error can be corrected?
Wespath helped craft the legislation and its intent. With anything in the Book of Discipline, it is the intent of the paragraph. The intent of the paragraph is for churches disaffiliating.
Additionally, this matter will be reviewed and will be reported to the 2022 May session of annual conference for how funds from closed churches will be used related to this matter.
Where can I find the redistricting info?
We are reducing the number of districts to six. More information can be found on pages 88-93.
Regarding the retiree health benefits, how will the copay change in 2022?
It will increase from $5 to $20.
The out-of-pocket limit is $2,500.