The changes, approved by the Covenant Board of Pensions and Benefits, include an increase of six percent in minimum benefits, as well as a six percent across-the-board increase for retirees, surviving spouses, and those still actively serving.
Including the April 1 increase, Covenant Pension Plan benefits since 1996 have been enhanced as follows:
• A 95% increase in retiree minimums
• A 119% increase in surviving spouse minimums
• A 26% increase in future benefits for active pastors
• An automatic spouse benefit increase from 50% to 65%
The increases in benefits since 1996 raised present and future pension liabilities by an additional $30 million, notes Dean Lundgren, ECC vice president for finance and director of pensions.
Governing investment guidelines help determine when increases in benefit levels are financially sustainable and fiscally prudent, Lundgren says. Those guidelines require a ten percent margin of market value of assets over the actuarial liability, including any pension increases, to provide some protection against downside market volatility.
Because actuarial liabilities increase by seven percent a year, it is possible to provide benefit enhancements only when cumulative investment returns remain well above the seven percent level, Lundgren adds.
The Covenant Pension Plan currently has 953 active members and 481 individuals who are receiving pension benefits, including 347 retirees and 134 surviving spouses. Distributions during 2006 totaled nearly $5.1 million, up from the $4.7 million in 2005.
“We are grateful to God for the ability to enhance the benefits for those who have so faithfully served over the years, as well as those who continue to serve,” Lundgren says.
