In this article I’ll discuss the letter Dwayne Cleave – Executive Director LCC Worker Benefits Services Inc (WBS) – sent in response to Pastor Clifford’s query.
The crux of the letter – and my reason for including it in this series – is the following:
- Churches that provided their church workers with a defined benefit (DB) pension plan entered into a binding contract to fund that plan so the promised benefits would be paid.
- In the event the DB plan became insufficiently funded for any reason, WBS – which administers the retirement plan – would increase the levy on each participating congregation in order to get the DB plan fully funded. This is why congregations in vacancy still have to pay an assessment – they made a commitment to fund the retirement of their past church workers and the ongoing levy is their part of keeping that contractual obligation.
- If, for some reason, a congregation did not pay their levy or tried to leave the WBS DB system, WBS would take legal steps to enforce the contract and protect the members retirement funding.
Dwayne closes point four of his letter with this comment:
(The CEF losses) …is another reason why it is so critical that WBP enforce its fiduciary duty to protect the pension benefits to the members; by expecting congregations to continue making monthly contributions in vacancy, and solvency top up payments on withdrawal.
Dwayne’s letter is extremely diplomatic in talking about churches wanting to take care of their past church workers and an expectation that they’ll keep up their side of the contract. This is consistent with what you would expect from a Christian community for whom “yes” is “yes” and “no” is “no” – one would expect they’d want to keep the promises they made to the church workers that cared for them in order to make sure they’d be cared for in their old age.
But make no mistake – every time Dwayne uses the term “expect” and “expectation” there’s an implicit “or else” that comes with it. Specifically, if a congregation didn’t meet its contractual obligations WBS would take steps to enforce the contract and compel payment. I don’t think it’d be the first thing they’d do, I expect it would be come with a great deal of reluctance, and I believe they’d explore every possible avenue to make things work for both sides, but if push came to shove it’s a card they could play in order to protect the interests of the church workers that depend on them.
And since WBS and churches are both run by Christians, this is a classic example of the potential existing for “Christians suing Christians” – one side being an organization that represents the interests of full-time church workers and the other side represented by individual churches. An example of this is the LCC pension administrator filed a claim against the ABC District in order to recover a significant amount of unfunded pension liability the District incurred on behalf of it’s past staff.
Given the circumstances this was a routine event – CEF’s
bankruptcy CCAA proceeding was a legal action and the pension administrator was legally required to file a claim to recover as much of the unfunded pension liability as they could. When this happened I have no recollection of hearing “why not rather be wronged”, “It’s God’s money so why are you mad (it’s gone)?” or the like. Contrast that action with any church worker that told a CEF depositor “It’s a sin to (join the representative action and) sue your fellow believers.” and “Why are you mad, it’s God’s money after all?”
So there you have it – on the one hand
- it’s wrong for the individual depositors to avail themselves of the left-hand kingdom authority to recover some of the life / retirement savings from members of a church that mishandled their funds and didn’t use it for its intended purpose,
while on the other hand
- it’s ok for a church worker pension plan administrator to use left-hand kingdom authority to ensure a contractual agreement is performed in order to protect the retirement income of the church workers they support.
Scripture takes a dim view of standards that favor one group of people at the expense of another and uses phrases such as “beam” and “speck” to describe it. (Matthew 7:3)
Why don’t we do the same thing?
I’ll close with an observation Pastor Clifford made about the difference between WBS’s work to care for LCC’s church workers vs LCC’s response to people affected by the CEF disaster:
If you refer back to slide 6, there is a very similar number of people affected as the total number of Defined Benefit Pension Plan members – “891” – who have lost an amount of money almost equal to the total value of the DB Plan Assets – “$73.5 million”.
From a beautiful illustration at Convention about driving down a 4 lane highway, the Pastors are driving a Cadillac while some LCC congregation members are sitting at the side of the road in a broken-down Lada.
It would have created so much goodwill if across the country we would have such “Information Sessions” / brainstorming sessions to look after “widows & orphans” whose retirement life savings – in dollar value & number of people affected are almost identical to the DB Pension Plan statistics – have been lost by the church. Looking after “widows & orphans” – I read about that somewhere.
The “widows and orphans” Pastor Clifford is referring to is this:
Religion that is pure and undefiled before God the Father is this: to visit orphans and widows in their affliction, and to keep oneself unstained from the world. James 1:27
Compare what scripture teaches with how LCC has treated the CEF depositors…
RESPONSES TO PENSION PLAN INQUIRIES
1. The DC component of the LCC plan was initiated in Jan 2003, with an intended purpose of encouraging Pastors and other Church Workers to voluntarily make personal contributions to the plan, so that their retirement income would hopefully be increased. The WBP’s rationale for this pro-active step was considered necessary, because the DB pension benefit most workers were accumulating during their employment years; simply was not going to be enough for them to live reasonably close to the standard of living they had pre-retirement. To encourage worker’s active participation each worker received a $100 deposit into their DC account for each credited year of service they had in the DB plan to a maximum of $1,500. To further clarify the maximum any one worker would have received as a kick start to their plan was $1,500. I recall that the start-up aggregate capital for these member deposits was approximately $400,000. The LCC pension plan was in a surplus solvency funded position, at the time the DC component was introduced. The funding surplus was primarily due to the high prescribed interest rate that had to be used to value the pension plan liabilities on a solvency basis. The kick start funding that was provided to member accounts equated to about 20% of the solvency funding surplus. It is very important to understand that pension plan funding contributions and any surpluses may only be used for the benefit of member’s pensions and to pay for expenses directly related to the pension plan. So adding the Dc component to the pension plan was an appropriate use of the funds at that time. It also turned out to be a foretelling decision because the DC component eventually became the primary retirement plan for the majority of active workers, when the DB plan was shutdown.
2. Congregations who go into vacancy ( temporary Vacancy) are not being assigned special assessments but rather are expected to continue making monthly contributions of $425 towards the DB pension plan to secure the pension benefits of Pastors and other Church Workers who faithfully served them in the past.. This is a logical expectation because pastors and other church workers who served at vacancy congregations earned a portion of their pension benefit at these locations. If a congregation goes into permanent vacancy or withdraws from the WBP they have in effect crystalized a solvency event and therefore must settle-up on their pro- rata share of the solvency deficit. Liens in property could come into play here as a possible funding solution if a congregation did not have sufficient liquid assets (cash or investments) to fund their share of the deficit. The rationale for this being that the congregation is probably just 1-3 years from permanently closing but wants to faithfully serve its remaining members by keeping the local Church building open. Upon disbandment the church building would be sold and a portion (or all if necessary) of the proceeds would be used to pay off the congregation’s pro-rata share of the solvency funding deficit.
It is very important to understand that the requirement to fund the full solvency deficit only becomes necessary if the congregation withdraws from the plans, which in essence is what they have done if they refuse to make the on-going monthly deficit payments. The reason we don’t have to regularly fund on solvency now is because we have worked very collaboratively with our pension plan regulator to address the pension plan funding shortfall; and has a result they have provided us with tremendous forbearance. This arrangement is a tremendous benefit to employers because if they were required to fund the plan on a solvency basis the employer contribution rate for the pension plan would be around 30% (almost double the current rate)
3. There is currently one circumstance where WBP agreed to accept the eventual sale proceeds of Sage shares from a former school employer to satisfy their pro-rata share of the solvency deficit. The estimated value of the shares is currently twice the amount of the pension liability so we feel there is sufficient margin available to secure the pension promise to the impacted members. The school management was also very motivated to secure the promised pension benefit to their impacted employees and had no other liquid or fixed assets available to do that. If upon the sale of the shares there is surplus funds after their solvency deficit is paid, it will go to the Church where the school operated.
4. You are certainly correct in your assessment that the financial failure of the ABC- CEF has negatively impacted their investors. But please keep in mind that the impacted investors also include many retired and some active Pastors and other Church Workers who reside in the ABC District. It would be particularly devastating to them if they were to suffer losses on both their CEF investments and their promised pension benefit. That is another reason why it is so critical that WBP enforce its fiduciary duty to protect the pension benefits to the members; by expecting congregations to continue making monthly contributions in vacancy, and solvency top up payments on withdrawal.
I hope these answers provide some clarity to your concerns but if not I would be most happy to speak directly with you about them on the phone…
In His Service,
Dwayne Cleave, Executive Director
LCC Worker Benefits Services Inc.
204-895-3433 Ext 219
Update: 2018-03-28 – ABC CEF is undergoing CCAA proceeding, not a bankruptcy. Thanks to “guest” on the CEF Investors Forum for pointing that out.