By Andy Hendren
   General Secretary and Chief Executive Officer
 
   

 

Rumors abound about pension matters related to disaffiliation. It's easy to get frustrated or let our emotions get the best of us. Yet, as I've written this blog, I've contemplated John Wesley's emphasis on grace and its centrality in Methodism. With grace toward others in mind, I believe those trying to make sense of the latest information about pension liabilities in the context of disaffiliation are acting with good intentions.

Nonetheless, pension issues in disaffiliation are complicated and sometimes counterintuitive. As we journey through these trying times, I'm hopeful our shared commitment to grace and Christian unity can lift us above the rhetoric and disagreement.

Wespath's role as a fiduciary of benefits and investment services is to help our participants, annual conferences, other plan sponsors and institutional investors build brighter futures. Every decision we make is guided by our mission to "care for those who serve"—our steadfast commitment since 1908.

Even as we face uncertainty about how many local churches will remain in The United Methodist Church (UMC) and which will disaffiliate to find new pathways, three things are certain to me:

1.  Wespath will remain hyper-focused on caring for those who serve so participants may have peace of mind;
2.  Wespath will continue to serve the UMC and reflect its mission and values as we have for more than a century; and
3.  Wespath will offer services to other Methodist faith communities, including the new Global Methodist Church (GMC), independent former UMC local churches, and groups of churches that may take other directions outside the UMC.

Amid the UMC's changes, Wespath strives to be an unbiased, non-anxious source of accurate and timely information for our stakeholders. Sometimes the information we provide in our role may seem to help or hinder disaffiliation, as noted below—but that is not Wespath's intent.

We maintain a dedicated webpage that is the best source of information for pension-related matters. We update it regularly, so if you want to verify the accuracy of what others are saying about pension matters, this webpage should be your first stop. The page has FAQs and information to assist clergy, other participants, annual conferences and local churches. If you have a question for which you don’t see an answer, please send it to [email protected].

Caring for those who serve includes our commitment that clergy who retire after years of ministry will have the retirement support they've anticipated. This is the foundation for pension withdrawal payments in disaffiliation.

General Conference 2019 (GC2019) sought to protect this commitment when it required that disaffiliating local churches pay an amount related to the UMC clergy pension plan to their annual conferences. This payment helps ensure that clergy pension plans will be sufficiently funded. The payment is not a penalty, nor is it intended to be a roadblock for local churches that want to disaffiliate. Rather, this payment reflects the shared responsibility to care for those who have served.

The calculation Wespath must use to determine the funded status of an annual conference's pension obligation is defined in The Book of Discipline (Discipline), ensuring objectivity in this process. Wespath's methodology is covered in more detail in this helpful video.

It's important to understand that interest rates are a significant variable in this calculation. Interest rates rise and fall daily. In fact, rates have changed more dramatically in recent months than in the past two decades. For example, if you purchased a home in 2021, you likely benefited from record-low interest rates on your mortgage. But if you purchased a house this summer, your mortgage rate was likely higher.

The long-term interest rates Wespath uses in its calculations have risen in 2022 mainly due to recent inflation. Higher long-term interest rates have reduced pension underfunding in the disaffiliation context in recent months.

Wespath regularly reviews our assumptions in calculating pension obligations. One assumption is applying a "liability premium" to the pension underfunding in the disaffiliation context, reflecting some practices of commercial insurers. Recently, we worked with an independent consultant specializing in this area to do a market-based review of the liability premium. Based on that review, Wespath reduced the liability premium in July.

The intent of this review was to determine, as a prudent professional practice, whether to adjust our assumption based on current practices in the pension marketplace. It was not to make it easier (or harder) for local churches to disaffiliate, even though this action reduced the withdrawal payment for some local churches. In fact, rising interest rates have had a much greater impact on reducing pension underfunding in the disaffiliation context than the liability premium adjustment. Moreover, interest rates could fall again, causing this pension underfunding to increase again. A detailed explanation of changing disaffiliation underfunding is here.

It's important to remember that Wespath's main role in disaffiliation is determining an annual conference's overall pension underfunding in the disaffiliation context under rules set forth in the Discipline. Wespath does not have a role in determining withdrawal payment amounts for disaffiliating churches—each annual conference determines what an individual local church may owe for its "fair share" of the pension underfunding, with flexibility to adapt to local contexts and unique circumstances. This isn't new. For decades, annual conferences have used different formulas to determine how much any local church owes for its share of pension costs.

Caring for those who serve is of utmost importance now as many discern their future path. If you're trying to make sense of something you’ve heard or read about pensions and disaffiliation, Wespath is here to help, with timely and accurate information and reliable assistance. Questions can be directed to [email protected].

I pray for God’s grace as we all navigate these uncharted waters.