Lutheran Church Tries to Avoid Shortfall in Pension Plan
Mikelic, Peter, Anglican Journal
A RECENT REPORT from the Certified General Accountants Association of Canada stated: "Fifty-nine percent of all defined benefit pension plans are running deficits, requiting $160 billion to cover the shortfall."
In the Evangelical Lutheran Church in Canada, the retiree fund of our pension plan contains an "unfunded liability." Translation the fund is running d deficit of $14.7 million, meaning that payouts to retirees be significantly reduced unless action is taken.
The national bishop of the ELCIC and those who manage the fund, though, are assuring members about the security of their pensions
Currently, ELCIC congregations and pastors make regular contributions to the plan: 10 per cent of an employee's salary goes into the Active Fund, paid in equal halves by employer and member. The employer also pays a 2 per cent supplemental contribution, credited to the members' account, unless there is an unfunded liability, in which case it is used to fund that shortfall.
(By comparison, employees of the Anglican Church of Canada contribute 2.2 per cent of their salaries and the employer--the diocese or the national church office--contributes the equivalent of 10 per cent. For more about the Anglican plan, see p. 18.)
At the start of 2003, the plan's net assets were $132.3 million--down from $152.3 million the previous year split between the Active Fund at $79.7 million and the Retiree Fund at $52.6 million. By Dec. 31, however, the plan showed a net return of 9.7 per cent, with assets totaling $138.6 million.
At present, the ELCIC retiree fund provides annuities to about 600 retirees or their surviving spouses. The annuities were established with an underlying assumption that the fund would return an average annual rate of 7 per cent. As the 7 per cent was not achieved in 2000, 2001 and 2002, the reserves have been exhausted and an unfunded liability generated. …