A member of National Church Council (NCC) responds to availability of all relevant pension information
This information is necessary to make sure that future pension administration is properly managed.
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NCC Response to Pension Information Request
Quoting MRS BARB STOLEE :
Hello all. As another ABT member of NCC, I will attempt to respond to this,
as I raised this question at the last NCC meeting with the chair of the
board of GSI, and in the NCC meeting.
The answer that I got was that the acutarial tables that were used for
projections were the 'standard industry tables' for the years in question,
and were named/footnoted in report documents. As these tables are public
domain, and the reference was included in the document so that individuals
could obtain those tables to understand the assumptions on which the tables
were developed, if they so desired, it was deemed unnecessary to include the
tables themselves in reports.
If that is not the case, I will willingly take that feedback back to Hildy
and the board chair. As indicated, this response is not an intention to debate, but rather to share the information we received at NCC.
Keith Odegard of Solid Ground responds:
"Barb, thank you for raising this issue with the chair of GSI and in the NCC
meeting. It is likely that the pension liability issue is the biggest
financial challenge facing the ELCIC. In terms of the actuarial tables,
there appears to be a misunderstanding regarding the request for information
that was made to GSI. We attempted to obtain the annual actuarial report
that describes the performance of the pension plan, including a comparison
of the mortality experienced by the plan compared to the mortality that was
predicted. For 2006 and 2007, (the only years that GSI would release any
information), the actual mortality was only 67% of what was predicted. This
means that significantly fewer pensioners died than was predicted. This
means that the pension plan will continue to pay out pension benefits to
these unexpected survivors. If the mortality assumptions are consistently
too optimistic, the size of the pension liability is likely understated.
The specific actuarial table is irrelevant to the issue. I am very surprised
that GSI introduced the question of the inclusion of a specific actuarial
table in the annual report, since this idea has nothing to do with a request
for the historical actuarial reports.
The request for past actuarial reports was an attempt to determine if over
the last 29 years, GSI has consistently used an actuarial table that
overstated the number of expected deaths. ELCIC policy permits GSI and NCC
members to vote on issues that have a direct impact on their finances. Up to
2002, pastor members of GSI and NCC benefited if GSI used an extremely
optimistic actuarial table because using this table enabled GSI to pay the
highest possible pensions to retiring pastors, including members of GSI, NCC
and the church hierarchy. The change in pension plan from a defined benefit
plan to a defined contribution plan resulted in pastors that retired prior
to 2003 receiving a pension significantly greater than if they waited until
2003 to retire. This situation indicates that the assumptions (including
mortality assumptions) used by GSI and NCC to set pension benefits for
retiring pastors pre-2003, was likely significantly more generous than what
could be obtained from organizations outside the ELCIC, such as annuities
from life insurance companies.
It is impossible to properly determine an appropriate course of action to
meet the significant financial challenges facing the ELCIC without an
accurate, realistic balance sheet, indicating assets and liabilities. It is
impossible to prepare a balance sheet that purports to describe the
financial condition of the ELCIC, if this balance sheet is based on overly
optimistic assumptions that have year after year proven inaccurate.
You mentioned the GSI chairman explained that "standard industry tables"
were used to determine the liability. This statement underscores the
likelihood that the actuarial assumptions are inadequate, since retired
Lutheran pastors likely have a much longer life expectancy than the average
population due to lower smoking rates, higher education, stable family
relationships, lower alcohol consumptions, non-hazardous work environments,
etc. It seems to me, a reasonable person would look at the actual mortality
results of the population of ELCIC pensioners over the last 29 years to
determine if the use of a "standard industry actuarial table" is valid in
estimating the future pension liability of the ELCIC.
To this point in time, both the National and Congregational levels of the
church have transferred over $ 10,000,000 in extra contribution to the
pension plan for those individuals before 2003. The amount of congregational
support to pay for the past service pension plan is roughly 170% of the
amount forwarded to the ELCIC by congregations to support the entire
National level of the organization. It appears likely that if the mortality
experience of 2006 and 2007 accurately reflect future mortality experience,
the ELCIC may currently be insolvent. It is imperative that all information
be made available to stakeholders to determine an appropriate course of
action at all levels of the church to address this financial crisis. Another
major objective of a full transparent, open analysis of the pension plan is
to determine if there is a need for reform of the structure, operations and
ethical assumptions of decision making bodies of the ELCIC, to insure that
the ELCIC assets are properly administered and protected.
GSI appears to be oblivious to the mortality assumption issue and appears to
have addressed the concern in two initiatives:
Refusal to release any actuarial reports prior to 2006 which would enable
stakeholders to review the veracity of the actuarial assumptions compared to
actual mortality results.
Issued the following statement to all individuals receiving pension:
"All ELCIC congregations continue to make contributions to the unfunded
liability that arose in 2002 and 2003 and we anticipate it will be fully
funded in 2015."
What GSI fails to mention is that their anticipation of full funding is
likely based on a "standard actuarial table" regarding mortality that was
grossly inadequate in 2006 and 2007. GSI have also refused to let a pension
member review the actuarial performance of the pension plan for years prior
to 2006.
It is virtually impossible to address the unfunded pension liability issue
without basic relevant information. More troubling, this issue illustrates
the consequences of operating an organization without the most rudimentary
conflict of interest rules. How can the ELCIC survive in the long term if
members of decision making bodies are permitted to vote on issues in which
they have a direct and/or indirect personal financial interest?
In the past, ELCIC conventions have made policy and set the direction of the
organization, including the priorities of the church hierarchy. It is
impossible for conventions to perform this function if relevant information
is withheld from delegates and the church at large.
As a member of NCC, I believe you have full access to all actuarial reports.
In order to determine if there has been a consistent refusal by GSI and NCC
to adapt mortality assumptions based on the actual results experienced by
the pension plan, you could request copies of the historical actuarial
reports and compare actual to predicted mortality. Your analysis may prove
to be critical information for convention delegates who are charged with the
responsibility of making decisions regarding the financial integrity and
future financial position of the ELCIC.
