Questions and Answers Regarding General Conference Pension Changes
What will happen to my Ministerial Pension Plan account?
The Ministerial Pension Plan (MPP) will continue as the Church's clergy pension plan until December 31, 2006, at which time all contributions to MPP will cease. Your MPP account balance (including accumulated earnings) will remain on account until you retire. You will continue to receive quarterly statements showing your accumulated balance. At retirement, as with MPP currently, you will receive at least 75% of the account balance in the form of a monthly annuity and the remainder of the balance as a single sum distribution or as an annual or monthly certain annuity.
What will happen to my Personal Investment Plan account?
The Personal Investment Plan (PIP) and the Cumulative Pension Benefit Fund (CPBF) were amended and restated as the United Methodist Personal Investment Plan (UMPIP) effective January 1, 2006. The Church continues to encourage you to supplement your church-sponsored retirement savings with tax-deferred and payroll-deducted contributions to UMPIP.
How does the new pension plan for clergy work?
Beginning January 1, 2007, the Clergy Retirement Security Program (CRSP) provides retiring clergy with two distinct benefits:
1) A monthly payment, payable for life, which is calculated by multiplying the following factors and then dividing by 12:
- 1.25%,
- the annual Denominational Average Compensation (DAC) when you retire, and
- your years of credited service after January 1, 2007.
This is the defined benefit component of the new plan. The monthly retirement benefit increases automatically by 2% each year after you begin to draw your benefits.
Example:
You retire at the 2015 annual conference, effective July 1, 2015. You have 8½ years of credited service under CRSP.
You will receive an annual benefit of
1.25% of the 2015 DAC times your 8.5 years of credited service.
If the 2015 DAC is $60,000, the calculation is as follows:
1.25% X $60,000 X 8.5 = $6,375.
The monthly benefit is $6,375 ÷ 12 = $531.25
2) A lump-sum distribution from an account balance held in your name. Beginning January 1, 2007, your annual conference will contribute 3% of your compensation to this account balance each month you are in active ministry. You choose the investments from among the General Board of Pension and Health Benefits' (General Board) investment funds. The account balance, with all accumulated earnings, will be available to you as cash when you retire. You may receive one lump sum, several smaller lump sums or cash installment payments of a specified amount for as long as your account balance lasts.
This is the defined contribution component of the new plan.
Over a career of 30 years, CRSP (both components together) is expected to replace approximately 50% of your pre-retirement income if you retire at a compensation level at or near the DAC.
Remember, benefits you receive under CRSP are in addition to benefits you may receive from MPP and for service rendered prior to January 1, 1982. You also may be entitled to Social Security benefits, UMPIP benefits or other personal savings you may have.
May I still have a lump-sum distribution of up to 25% of MPP?
The distribution provisions of MPP will not change when the new plan, CRSP, becomes effective on January 1, 2007. When you retire, you must convert at least 75% of your MPP account balance to a life annuity. The remaining 25%, however, is available to you as a lump-sum distribution. You also have other options concerning this 25%. You may:
- rollover all or a part of the 25% to UMPIP or other eligible retirement plan,
- leave all or a part of the 25% on account with the General Board until you attain age 70½, or
- convert all or a part of the 25% to a period-certain (term) annuity.
How does the new pension plan for general agencies work?
Effective January 1, 2007, employees of general agencies will be enrolled in the Retirement Security Program for General Agencies (RSP). This plan purposely mirrors CRSP, the plan offered to clergy, with one major exception: The defined benefit component is calculated using an average of the employee's three highest years of compensation received during the 10 years before retirement.
If you are a clergyperson who works for a general agency, you will be enrolled in RSP, not CRSP.
In which plan do deacons participate?
Most deacons will be enrolled in the same plan as their other clergy colleagues. Under CRSP, the annual conference becomes the plan sponsor for deacons appointed to a local church, charge, conference or entity for which the conference has pension responsibility. This means that most United Methodist deacons will be enrolled, along with elders and local pastors, in CRSP. They will receive the same benefits as other clergy. Clergy in most extension ministries, however, will need their employers to sponsor the UMPIP in order to receive pension benefits.
I am already retired. Does the new plan affect me?
If you are retired and are currently receiving benefits, you are not affected by either CRSP or RSP. You will continue to receive the same retirement benefits you have been receiving under MPP or the Staff Retirement Benefits Program (SRBP).
If you are a retired clergyperson receiving benefits under MPP Supplement One (Pre-1982 Plan), you might notice a change in how much your benefit increases from year to year. An important provision of CRSP establishes guidelines on this increase.
Are bishops enrolled in CRSP along with other clergy?
Bishops are full participants in CRSP, effective September 1, 2008, when bishops' assignments change. Until that time, they remain enrolled in MPP.
The defined benefit formula for bishops is slightly different than the formula for other clergy. For their years as a bishop, bishops will receive a defined benefit equal to 1.25% of compensation, not the DAC, at the time of retirement. The use of actual compensation in the defined benefit formula is consistent with existing plan design. The defined contribution component is the same as for other clergy (annual contributions of 3% of compensation).
As with other clergy, bishops retiring after September 1, 2008 will receive benefits from the new plan (CRSP), the former plan (MPP) and possibly the Pre-82 Plan.
Are laypersons who are employed by the local church receiving any new benefits?
General Conference 2004 passed legislation that requires the pastor-parish (staff-parish) relations committee to recommend to the church council that a pension benefit of at least 3% of compensation be provided for lay employees who:
- are at least 21 years of age,
- have at least one year of permanent service, and
- work at least 1,040 hours per year (20 hours a week).
Though not strictly mandatory, the recommendation of lay pension benefits is now a part of the official duties of the pastor-parish Committee as listed in The Book of Discipline. Church councils responding to pastor-parish recommendations are to begin providing benefits by January 1, 2006.
Based on this legislation, a local church employee earning $20,000 per year would receive from the church an annual contribution of $600 ($50 a month) into his or her retirement account. An employee earning $12,000 per year would receive an annual contribution of $360 ($30 a month).
This legislation also applies to lay employees of the annual conference.
The General Board administers pension plans for lay employees of the Church and affiliated agencies that local churches may sponsor, but local churches and annual conferences are free to contract with the provider of their choice.
I am a member of my local United Methodist church, but I am not employed by the Church at any level. Will I be affected by the recent changes?
The changes adopted by General Conference 2004 relate to pension and disability benefits offered to United Methodist clergy and lay employees of general agencies, annual conferences and local churches. These benefits are not available to you as a member of a local church.
As a member of a local church, however, you are affected by the recently passed legislation, because you help pay the cost of all church-provided benefits. Your church has been paying the benefits for your clergy all along and will continue to do so. If your church follows the recommendation of your pastor-parish (staff-parish) relations committee and begins to provide pension benefits to its lay employees by January 1, 2006, then your church may have a small additional pension expense. For churches currently not offering benefits, this is a new expense that will have to be paid out of the church budget.
Were there any changes to the clergy death and disability plan?
General Conference made no changes to the death benefit and the disability benefit provided by the Comprehensive Protection Plan (CPP). It did amend CPP, however, in order to allow annual conferences, beginning January 1, 2005, to be the plan sponsor for deacons.
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