# LCMS Convention Workbook_St. Louis Missouri_1969_S482 # Machine transcription, uncorrected — CHI Digital Archive (demonstration) STEWARDSHIP AND FINANCES; RETIREMENT AND BENEFITS 469 Board of Pensions and Support — secretary of the Work Committee Earl Haake, administrator of the Concordia Plans Herbert W. Schuppan, chairman of the Board of Man- agers of the Concordia Plans The Work Committee has consulted with Nelson and Warren, Inc., consulting actuaries for the Concordia Plans and the Pension Plan for Pastors and Teachers, and James P. Brown, counsel for Synod. The first meet- ing of the Work Committee was held on April 27, 1968, and subsequent meetings have been held on Aug. 10, 1968; Nov. 2, 1968; Nov. 23, 1968; Jan.11, 1969: and March 8, 1969. The committee studied the plans and had several actuarial valuations made. It then addressed itself to the consideration of merging the Pension Plan for Pas- tors and Teachers with the Concordia Retirement Plan. In the 4 years since first studied, the technical and fund- ing problems have not disappeared while the positive reasons for combination have diminished. If the plans are kept separate, many of the pastors and teachers under age 55 will receive a greater retire- ment benefit than they would receive on basis of full credit in the Concordia Retirement Plan for past ser- vice. No one has the right or the desire to take this greater benefit away from them. On the other hand, if those presently retired, and others who will retire in the next few years, were to receive benefits raised to the level of full Concordia Retirement Plan benefits, it would cost some 20 million dollars which would have to be provided in a relatively short time from some source. This did not even take into account the legal prob- lems which were not fully researched, but are formi- dable. A merger of the Pension Plan with the Concordia Retirement Plan is, therefore, not recommended at this time. The committee, therefore, addressed itself to the problem of upgrading the Pension Plan. In the light of the studies which were made, various courses of action were considered, and decisions were reached which resulted in the following recommendations: 1. Allocate the same investment yield to both the Annuity Fund and the Active Accounts. The Work Committee feels that the principle of equity to all mem- bers of the plan requires the same distribution to both. This compares with the present practice which has credited the interest assumption in the annuity pur- chase rate to the Annuity Fund and a yield more closely associated with the earnings rate on the total assets to the Active Accounts. For example, the most recent declaration was 3% to the Annuity Fund and 5% to the Active Accounts. 2. It was determined that under the present annuity purchase rate (1955 American Annuitants, set back 1 year, 3°) the required reserves for annuity payments are less than the assets of this fund, creating a surplus of approximately $1,700,000. We recommend this be credited to the presently retired members and widows in the form of increased annuities of approximately 16 over their present annuities. 3. Revise the annuity purchase rate that is applied to account balances of retiring members to the 1951 Group Annuity Table, projected to 1965 on Projection Seale C, with 442° interest. This basis reflects a more up-to-date mortality table, which recent group annuity experience studies have shown to be representative of current mortality of annuitants, with margins for future mortality improvement. The 412° interest assumption is justified by the experience of the plan in recent years and the current trend in investment opportunities for the fund. In addition, this new annuity purchase rate will be consistent with the actuarial assumptions pres- ently used in the valuation of the Concordia Retirement Plan, This would result in an increase in the amount of annuities being purchased of approximately 20% —22% above those provided in the present annuity purchase rate. 4. The above considerations presented the opportu- nity to increase the annuities to the present retired members to approximately 38°; above the present an- nuities being paid. For the most part, granting such an increase would result in an exact offset in the amount of subsidy being provided by the Synod. There was a strong feeling in the Work Committee that the present level of subsidy has become inadequate since the time it was established at $150 per month and that the sources for increased annuities described above should best be used to enable the Board of Pensions and Sup- port to propose a new level of total pension payment. The Work Committee, therefore. is recommending that the board increase the total pension payments to be provided from retirement annuities and subsidy to $165 per month. This will still result in an overall reduction in subsidy payments of slightly more than $100,000 in 1969 and propcrtionate reductions in future years’ ex- pected subsidy outlay. Corresponding increases would be granted in widows’ pensions to maintain the present 60° relationship. 5. The stock portfolio of the fund presently shows an appreciation of approximately 10 of the total assets of the fund. The Work Committee feels that this pres- ent condition and the future outlook for the portfolio and its investment policy will continue to create such gains and we should begin to distribute these among the active members and the retirants. The first step would be to allocate both to the Annuity Fund and to the Active Accounts 50’ of the current amount of ap- preciation in the stock portfolio. This will result in a credit of approximately 5°, to the Annuity Fund and the Active Accounts above the amount of investment yield also being allocated. This initial distribution is to be made on Aug. 31 in recognition of the appreciation of Jan. 31, 1969. The allocation will be made on the amount of the Annuity Fund and the amount of the Active Accounts in effect on Jan. 31, 1969.