By John Fuller, Executive Director, Pensions and Related Benefits
In the event of a church disaffiliation from the Virginia Conference of The United Methodist Church under paragraph 2553 of the Book of Discipline, the disaffiliating church will be required to pay its share of the Virginia Conference’s clergy pension liabilities and the projected liability associated with the conference-sponsored retiree medical plan. A brief video overview of the conference’s clergy benefit liabilities can be found here. Following are answers to frequently asked questions regarding these liabilities:
Why is there an unfunded clergy pension liability?
The clergy pension liability represents the difference between the value of the Virginia Conference’s pension assets and the total projected amount that will be paid in pension benefits to our conference’s retired clergy. This calculation is based on pension benefits that have already been earned, and does not represent benefits that will be earned in the future. Because the present value of the pension assets is less than what is projected to be paid in the future, there is an unfunded liability.
What is the Virginia Conference’s total unfunded clergy pension liability?
Wespath, which is our denomination’s general agency that administers our clergy pension plans, calculates each Annual Conference’s unfunded liability. As of the most recent calculation (as of October 1, 2022), the Virginia Conference’s unfunded pension liability is about $45.8 million.
Wespath calculates the unfunded pension liability on a market value basis; what does that mean?
Long-term pension liabilities involve risks, such as the risk that pension assets will not grow at the rate that is projected or that pension beneficiaries will outlive the actuarial projections. Calculating the pension liability on a market value basis involves transferring the financial value associated with those risks from the disaffiliating church to another entity that will bear those long-term risks. This calculation methodology ensures that sufficient funds will be available in the future to pay the pension benefits that have been earned by our conference’s retired clergy, and that disaffiliating churches will no longer be subject to those long term pension risks.
What is the retiree medical liability?
The Virginia Conference’s retiree medical liability represents the projected cost of clergy retiree medical benefits that have already been earned. Our conference’s clergy earn these benefits through their years of ministry in the Virginia Conference, and this liability represents the funds that will be needed to keep the promise that has been made to our conference’s retired clergy. As of the most recent valuation, the retiree medical liability is about $53.8 million.
When and how often will the clergy benefit liabilities change?
Wespath’s calculation of the unfunded pension liability will be updated quarterly, and the retiree medical liability is updated annually.
How will a local church’s share of these liabilities be determined?
A local church’s share of the total clergy benefit liabilities will be calculated using the church’s decimal that is used to determine the church’s annual apportionments.
Memorandum date: October 19, 2022 – For more information email John Fuller at [email protected]