Pension Plan Problem

September 7th, 2012

I am the financial "nerd" in our family so I always take a look at the "Hark!" newsletter from the General Board of Pension and Health Benefits. For the July 2012 issue, I did a double-take and here is why. The Supplement to "Hark!" covers the changes the General Conference-approved to clergy retirement and welfare plans. While I am not an expert in the clergy retirement programs for The United Methodist Church, I do know that long-term sustainability of a defined benefit (pension) system is of great concern. I read through the details of the changes to retirement and found the following very startling.

This is the text found in "Hark!" (emphasis theirs):

Surviving spouse benefit- Under the current CRSP, married and unmarried participants receive the same initial benefit amount (assumes all other factors are the same). When a retired, unmarried participant dies, his or her DB [defined benefit] payments cease. However, when a retired, married participant dies, 70% of his or her DB benefit payments continue to the spouse for life. Therefore, under the current CRSP, married retirees receive benefits of greater value than unmarried retirees.

Beginning January 1, 2014, the initial dollar amount of the benefit paid to a married participant will be reduced to offset the value of spousal benefits. Please note: This change only applies to service on or after January 1, 2014. Benefits earned under the current CRSP are not affected.

In plain-speak, you will get less money from the pension plan on a monthly basis if you are married upon retirement than if you are unmarried. I confirmed this with a customer service representative at GBOPHB. If your spouse dies the year after or even the day after you retire and receive benefits, you will be penalized financially through lower monthly benefits because you were married at the time of retirement. The representative did not have any other documentation to share with me or any way to tell me the percentage difference in benefits that married clergy would receive compared to unmarried clergy. They are still working on developing these materials. [Editor's note: more information, including the percentage difference, is now available.] The GBOPHB has a tool that lets you project your retirement income based on these new changes- if my husband is married at the time of retirement, he is projected to receive $7,000 less in retirement benefits (in 2046 dollars) than if he were single.

I understand that pension sustainability is vitally important, not only for our current retirees but also for future ones. The GBOPHB is taking steps to try to make the system work for everyone, but I fundamentally disagree with the use of marital status to determine your benefit amount. I also don't buy the line that "married retirees receive benefits of greater value than unmarried retirees." Married clergy members currently do not receive benefits greater than unmarried clergy- their spouses do. If sustainability is the problem, not fairness, then the GBOPHB should say as much and not try to spin the issue.

I see two potential and significant unintended consequences to this change:

1) Female, married clergy will be hit the hardest, as women are more likely to outlive their husbands. The benefit payments that their husbands would supposedly receive are less likely to occur because they are more likely to die before their wives. But they will pay for this "benefit" anyways to the tune of several thousand dollars per year of retirement income.

2) Married clergy who are financially strapped going into retirement are forced to choose between marital status and making ends meet. We live in an area of the country with a high percentage of retirees, some of whom have decided not to marry in retirement because they will lose their pension benefits; instead, they live together as husband and wife but don't have the legal status of "married." While I don't think we would have a rampant problem of divorce among clergy members for financial reasons, I do believe that one divorce over money is one divorce too many. The United Methodist Church should not be supporting policies that discourage marriage.

While I was not privy to the internal discussions and analysis that went into determining these plan changes, I am appalled that this was voted through by General Conference. I wonder if delegates really understood what they were voting on given the lack of details that exist three months later. If there could ever be a "redo", I would recommend the following:

If long-term sustainability hinges on the amount of pension payments made to surviving spouses, then reduce the amount that spouses receive when the clergy member dies. They did not work for the UMC (although the itinerancy-based system of the UMC makes a traditional career, including securing retirement benefits, incredibly difficult for clergy spouses and that is a WHOLE other can of worms), and so the surviving spouse pension benefit should not be considered a right but a perk.

Lindsey Foster Stringer is an education management consultant by profession and a financial coach by ministry.

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