California – Nevada Conference 2019 Pre-Retirement Seminar
Wespath Benefits and Investments • Not-for-profit organization • Approximately $22 billion in assets under management • 100,000 participants • Wespath maintains the largest reporting faith-based pension fund in the world Caring for those who serve by providing investment and benefit services that honor the mission and principles of The United Methodist Church. 2 | Wespath 2 | Wespath
Overview • Retirement Provisions • Wespath Retirement Plans • Investing with Wespath • Housing Allowance Exclusion • Comprehensive Protection Plan (CPP) • EY Financial Planning • Wespath Participant Services 3 | Wespath 3 | Wespath
Provisions for Retirement— Book of Discipline ¶357 • Normal Retirement: Age 65 or 40 years of service • Early Retirement: Age 62 or 30 years of service • Mandatory Retirement: Age 72 • 20-year retirement 4 | Wespath 4 | Wespath
§ 415 Compensation Plus Housing Benefits— Plan Compensation Example: (1) Taxable cash salary $25,000 (2) 125/403(b) reduction $ 5,000 (3) Housing exclusion $ 2,000 (4) Parsonage (25%) $ 8,000 Total Plan Compensation $40,000 5 | Wespath 5 | Wespath
Denominational Average Compensation (DAC) Average plan compensation of clergy serving full-time appointments 2018: 2019: 2020: $70,202 $71,361 $72,648 6 | Wespath 6 | Wespath
Wespath Retirement Plans CRSP 2014+ CRSP UMPIP 2007-2013 CRSP 1982-2006 Ministerial Pension Plan (MPP) Pre-82 Plan (Minister’s Reserve Pension Fund) 7 | Wespath 7 | Wespath
Clergy Retirement Security Program (CRSP) + Monthly benefit Account balance Defined Benefit Defined Contribution (DB) (DC) 8 | Wespath 8 | Wespath
CRSP DB: Service from 2007 – 2013 Monthly payment, payable for life, Example for calculated by multiplying the following 2019 Retirement and then dividing by 12: $71,361 (2019 DAC) x . 0125 • 1.25% x 7 years • DAC at time of retirement = $6,244 • Years of credited service from ÷ 12 January 1, 2007 until December 31, 2013 = $520 per month (7 years if full-time) 9 | Wespath 9 | Wespath
CRSP DB: Service 2014 – June 30, 2019 Monthly payment, payable for life, Example for calculated by multiplying the following 2019 Retirement and then dividing by 12: $71,361 (2019 DAC) x . 01 • 1.00% x 5.5 years • DAC at time of retirement = $3,925 • Years of credited service from ÷ 12 January 1, 2014 until June 30, 2019 = $327 per month 10 | Wespath 10 | Wespath
CRSP DB: Service 2007 to 2019 • Surviving spouse benefit 2019 Retirement available Total benefit: • Choice of cost-of-living $520 adjustment (COLA) + $327 • Reduction for early retirement = $847 per month 11 | Wespath 11 | Wespath
CRSP DB: Age 63 Early Retirement 2019 Early Retirement Total benefit: $745 per month $847 Full amount for 2019 - $102 12% reduced; reduction of 6% per year = $745 Per month In this example the clergyperson does not meet the 40-years-of-service rules 12 | Wespath 12 | Wespath
Matching Contributions 1% Participant 2% before-tax, Roth Match Non-Match and/or after-tax With 1% UMPIP contributions contribution CRSP DC UMPIP 13 | Wespath 13 | Wespath
CRSP DC • Account balance invested as directed by the participant • Available as cash distributions ─ Full lump sum distribution ─ Partial lump sum distribution ─ Cash installments: Self-Managed Retirement Income, or LifeStage Retirement Income • Remaining balance paid to beneficiaries upon participant’s death • Can leave on account until age 70½ 14 | Wespath 14 | Wespath
Example—Pastor Peterson Appointment Retirement Plan Lifetime Benefit Account Balances Grove 01/01/07 – 06/30/09 Malvern 07/01/09 – 06/30/11 $1,090 $39,000 CRSP Leola 07/01/11 – 06/30/13 (DB) (DC) Temple 07/01/13 – 12/31/22 15 | Wespath 15 | Wespath
Wespath Retirement Plans CRSP 2014+ CRSP UMPIP 2007-2013 CRSP 1982-2006 Ministerial Pension Plan (MPP) Pre-82 Plan (Minister’s Reserve Pension Fund) 16 | Wespath 16 | Wespath
Ministerial Pension Plan: 1982 – 2006 • MPP provides a lifetime benefit upon retirement and a cash account balance • Account balance invested using LifeStage Investment Management • MPP account balance (including accumulated earnings) remains separate from other plan balances and benefits until distributed in retirement 17 | Wespath 17 | Wespath
Ministerial Pension Plan Account Balance Life Annuity • As a cash distribution • Six -life annuities • Other options • Percentage increase 18 | Wespath 18 | Wespath
MPP Election Options • Annuity is based on 65% of MPP balance—no more, no less • Remaining 35% of balance may be: ─ Rolled over to UMPIP or other retirement plan ─ From UMPIP, taken as: Partial lump sum Self-Managed Retirement Income LifeStage Retirement Income • Taken as full cash distribution 19 | Wespath 19 | Wespath
Retirement Options: MPP Life Annuity Options 6 % Life annuity COLA Annual types increase 20 | Wespath 20 | Wespath
What Is an Annuity? A series of payments Life annuity —benefit payments that last through the participant’s lifetime (or two lives, if joint annuity elected) 21 | Wespath 21 | Wespath
Life Annuity Factors • Participant’s age • Contingent annuitant’s age (typically surviving spouse) • 65% of account balance • Type of annuity selected • Percent of annual increase selected (i.e., 0%*, 2%*, 3%*, 4%* or 5%*) • Mortality table ( life expectancy ) • Wespath annuity payout rate ( wespath.org/retirement/mpp ) * CRSP DB does not offer a 0% COLA 22 | Wespath 22 | Wespath
MPP and CRSP DB Distribution Options: Life and Survivor Annuities Example: Annuity Type Payable to You Payable to Contingent Annuitant Life and 100% $1,196 $1,196 Life and 85% $1,239 $1,053 Life and 70% $1,284 $899 23 | Wespath 23 | Wespath
MPP and CRSP DB Distribution Options: Life Annuities Example: Annuity Type Payable to You Life only $1,551 Life with 5-year certain $1,540 Life with 10-year certain $1,501 24 | Wespath 24 | Wespath
MPP and CRSP DB Annuity: COLA Options* $4,800 5% $4,200 4% 3% $3,600 2% 0% $3,000 $2,400 $1,800 $1,200 $600 $0 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 * CRSP DB does not offer a 0% COLA 25 | Wespath 25 | Wespath
Historical Annual U.S. Inflation Rates 8.7% 4.0% 2.8% 2.2% 1.9% -3.3% Past 198 Past 100 Past 50 Past 25 Highest 10 Lowest 10 Years Years Years Years Years Years Sources: 1821-1913 Global Financial Data; 1914-2018 U.S. Bureau of Labor Statistics; Consumer Price Index for All Urban Consumers: All Items (CPIAUCNS), retrieved from FRED, Federal Reserve Bank of St. Louis 26 | Wespath 26 | Wespath
Retirement Considerations: MPP • Can leave on account until age 70½ • Annuity options ─ 0, 70%, 85%, 100% survivor ─ 0, 2%, 3%, 4% or 5% annual increases ─ Single Life • Use of 35% of account balance 27 | Wespath 27 | Wespath
Example—Pastor Peterson Appointment Retirement Plan Lifetime Benefit Account Balances Avondale 01/01/82 – 06/30/84 Berwyn 07/01/84 – 06/30/88 $1,300 $80,000 Central 07/01/88 – 06/30/94 MPP (65%) (35%) Exton 07/01/94 – 06/30/02 Grove 07/01/02 – 12/31/06 Grove 01/01/07 – 06/30/09 Malvern 07/01/09 – 06/30/11 $1,090 $39,000 CRSP Leola 07/01/11 – 06/30/13 (DB) (DC) Temple 07/01/13 – 12/31/22 28 | Wespath 28 | Wespath
Wespath Retirement Plans CRSP 2014+ CRSP UMPIP 2007-2013 CRSP 1982-2006 Ministerial Pension Plan (MPP) Pre-82 Plan (Minister’s Reserve Pension Fund) 29 | Wespath 29 | Wespath
CRSP Supplement One: Pre-82 Plan Pre-82 Defined Benefit Formula Benefit Service Money (DBSM) 30 | Wespath 30 | Wespath
Pre-82 Benefit • Lifetime monthly benefit payment • Benefit is the greater of: ─ Pre-82 Years of Service x Past Service Rate ─ DBSM account balance converted to annuity Example: • 10 years x $703 = $7,030 annual benefit / 12 = $586 monthly benefit • $150,000 converts to $8,424 annual benefit • $8,424 / 12 = $702 monthly benefit 31 | Wespath 31 | Wespath
DBSM vs. Formula Benefit Example: Past Service Rate Benefit vs. DBSM Benefit 18,000 15,000 Annual Benefit $ 842 PSR 12,000 9,000 6,000 $703 PSR 3,000 0 Year PSR Benefit DBSM Benefit 32 | Wespath 32 | Wespath
Pre-82 Formula Benefit Actuarial Reduction for Early Retirement: ½% per month or portion of a month that retirement begins in advance of Normal Retirement Example: Age 61 with 37 years of service • 3 years from normal retirement • ½% per month for 3 years = 18% reduction 33 | Wespath 33 | Wespath
Pre-82: Benefit Paid for Life Single Participant • Single-life, no refund • Benefit ceases upon participant’s death Married Participant • Life and 70% to surviving spouse— set by annual conference ─ Spouse during episcopal appointment, at time of retirement and when beginning benefits 34 | Wespath 34 | Wespath
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