Church Pension Group issues report in advance of 81st General Convention

By Melodie Woerman
Posted Jun 20, 2024

Members of the staff of the Church Pension Group were part of a June 14 webinar that marked the 15th anniversary of the Denominational Health Plan and the mandatory pension system for lay employees.

[Episcopal News Service] On June 20 the Church Pension Group issued a report to General Convention in advance of its June 23-28 meeting in Louisville, Kentucky. In it, CPG offered updates on two benefits that were created in 2009 – the Denominational Health Plan for all church employees and a mandatory pension system for lay employees.

A press release that accompanied the report noted that parity of benefits for clergy and lay employees long has been an important topic in the church, and both the health plan and lay pension system have worked toward that. But according to Mary Kate Wold, CPG’s chief executive officer and president, full parity would require additional action by General Convention, especially regarding lay pensions.

On June 14, CPG also hosted a webinar that marked the 15th anniversary of General Convention action that created both the denominational health plan and the lay pension system. It also addressed the benefits that are offered by CPG and the issue of lay/clergy parity. The webinar was livestreamed.

The denominational health plan

Before 2009, 100 different health plans were offered by dioceses across the United States, each with varying levels of rising costs, according to the CPG report.

The denominational health plan, administered by The Episcopal Church Medical Trust, offers the same benefits to clergy and employees who work a minimum of 1.500 hours a year – and it requires that lay and clergy employees pay the same portion, if any, of premium costs.

In the webinar, Wold said nearly 95% of eligible employees are part of the denominational health plan. In 2024, she estimates 6% cost increases, while other plans in the U.S. expect increases of 7-9%.

Frank Armstrong, CPG’s chief operating officer, said during the webinar that offering health insurance in the United States is both complex and costly in part because of differing regulations among states and regions. And given that the denominational health plan provides more benefits than some other plans and serves an employee population base that is older than the U.S. average, “there is only so much we can do about costs.”

He also said that as new, expensive treatments are invented, including things like gene therapies, covering those costs will further impact health insurance premiums.

Armstrong was a member of the Task Force to Advise the Church on Denominational Health Plans that was created by General Convention in 2022. In its report it said that past General Conventions, in trying to achieve equity in pricing across the United States, actually skewed costs in favor of more expensive areas. Because health care costs differ across the country, as does the cost of living, “a functional result of the Convention’s action was to artificially subsidize the cost of health care in high-cost areas – areas that are usually (but not always) more resourced – with funds paid into the medical trust through insurance rates from lower-cost areas with lower cost of living.”

The task force found that clergy and lay employees of The Episcopal Church in Navajoland, an area mission serving Navajo communities in parts of Arizona, New Mexico and Utah, until this year had been foregoing the denominational health plan because it was unaffordable and instead were relying on the federal Indian Health Service.

Task force members made an emergency relief appeal to Executive Council for Navajoland, and the church’s governing body between convention approved $150,000 to cover the area mission’s 2024 health insurance premiums.

A resolution before General Convention, A101, calls for equitable access and price structures and specifically calls for prices that will ensure that the Navajoland Area Mission and the Dioceses of Alaska, North Dakota and South Dakota – all of which have a significant number of Indigenous ministries – can afford coverage for their lay and clergy employees through the plan.

Pension plans

Since 1917, all eligible clergy in The Episcopal Church have been enrolled in a defined benefit pension plan, currently with employers contributing 18% of a cleric’s compensation to pay for it.

A defined benefit pension plan is one in which, upon retirement, employees receive a monthly pension that is based on their compensation history and their years of service.

The report noted that in addition to more than 100 years of contributions, the Clergy Pension Fund has grown because of wise investments that now allow it to offer benefits beyond the value of benefits that those in CPG’s defined benefit plan for lay employees have – where employers are assessed 9% of lay employee salaries. The Church Pension Fund began offering a defined benefit plan for lay employees in 1980.

In the 1990s, CPG also began to offer a defined contribution pension plan for laity. The defined contribution plan offered is similar to a tax-deferred 401(k) plan, in which employers and employees contribute to an investment account. In the church, it’s a 403(b) rather than a 401(k).

But because not all Episcopal Church-related employers enacted General Convention’s legislation urging them to provide a pension plan for lay employees, in 2006 General Convention authorized a feasibility study on the issue. The result was that in 2009 changes were made to church Canons that mandated lay pensions.

Today, the June 20 report says, all U.S. dioceses comply, and 89% of employers have chosen to provide the defined contribution plan for its employees.

The CPG defined contribution plan requires employers to contribute 5% of the employee’s salary to an investment account through Fidelity Investments, with whom CPG contracts, but with employees deciding on the plan they want and how its investments are allocated. The employer also will match an employee’s own contributions up to 4% of salary, and the employee is free to add additional contributions if they wish, but only the first 4% will get the employer match.

Unlike a guaranteed monthly pension, the amount available at retirement through a defined contribution plan is based on how much money has been contributed to the employee’s investment account, as well how that money has been invested and the performance of those investments over time in stock and bond markets.

The report said a recent survey showed that while lay employees were happy with their retirement savings options, they weren’t confident they would have enough money to retire.

It notes that the 2009 actions that created mandatory lay pensions set minimum employer contribution, and today that usually is referred to 9% (the 5% base with a 4% match for an employee’s 4% contribution) – but both employers and employees can contribute more.

In 2019, Executive Council decided to do exactly that for lay employees of the church’s official legal entity, the Domestic and Foreign Missionary Society. Effective July 1 of that year, its minimum-required contribution to lay defined contribution plans went from 5% to 8%.

When that is added to the 4% employer match for employee contributions of 4%, the DFMS total of 12% ­comes close to the 12.4% that is earmarked specifically for clergy pensions out of that plan’s 18% contribution. This moves lay retirement benefits for church staff closer to parity with clergy benefits.

The report states clearly that there currently isn’t parity in pensions for lay and clergy employees, something it says “has caused tension for some in the church.”

It noted that even if all lay employees were enrolled in a CPG defined benefit plan with the same 18% employer assessment that clergy have, it wouldn’t have the same pool of money to draw on that the 107-year-old clergy pension system has. Laws prevent the clergy pension assets from being used to subsidize lay pensions, the report says.

Wold said, “It’s impossible for CPG to achieve full parity in benefits on its own, because many of the gaps in parity are the result of decisions outside of CPG’s purview. Still, CPG is doing what it can to provide access to competitive products and services while also describing what it would take from the church to achieve parity in pension benefits.”

The report also highlighted the election at General Convention of trustees to the Church Pension Fund Board. There are 25 nominees, including four current trustees, running for the 12 open positions.

Church Pension Group, which describes itself as a financial services organization that serves The Episcopal Church, includes five companies that support three lines of business: benefits (the Church Pension Fund and the Episcopal Church Medical Trust), insurance (Church Life Insurance Corporation and the Church Insurance Companies), and publishing (Church Publishing Incorporated).

The report was dedicated to the late Very Rev. George Werner, who served as president and vice president of the House of Deputies for 12 years and was a 20-year trustee of the Church Pension Fund.

—Melodie Woerman is a freelance reporter based in Kansas.