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Benefits board still battling financial uncertainties

September 29, 2011 No Comment

As stock markets continued reacting to world financial instabilities in late September, the Board of Managers of Lutheran Church–Canada’s Worker Benefit Plans met in Toronto to hear reports from the pension plan’s investment managers.

With the current extreme market volatility, the investment managers outlined defensive actions taken to protect LCC pension plan assets. The active fund managers overseeing 60 percent of LCC’s portfolio reported that over the past few months they have shifted more of the assets they manage into fixed income areas. The board members noted that the actions reflect a long-term investment pension plan portfolio strategy focusing on increased returns and decreased risk. Although to the end of August the total fund realized a slightly negative return, WBP Executive Director Dwayne Cleave noted that the -0.7 percent rate “is marginally better than the benchmark used to measure the performance of the fund managers given the ongoing market returns.”

The Board also heard from the plan actuary who reported a decrease in long-term interest rates used for valuing pension plan liabilities. Unfortunately, a decreasing interest rate increases pension plan liabilities. “Our plan was 77 percent funded on a solvency basis as of December 31, 2010,” explained Mr. Cleave. “The combination of decreasing interest rates and no asset growth in 2011 means the funding ratio has likely deteriorated.” The actuary speculated the possibility of a 5 percent deterioration in the funded status. Like many other pensions plans, LCC’s is still recovering from the dramatic stock market and interest rate decline in the fall of 2008.

In light of the combination of low interest rates and unpredictable investment returns, the executive director worked with district Church Extension Funds to put into place a plan designed to bring the pension plan back to full solvency within five years as required by the regulator. The combination of employer pension contributions and loans from the CEFs will top-up the pension plan. With ten years to repay the loans, the BOM can initially stabilize rates charged to congregations. Effective October 1, 2011 the pension premiums will drop from 16.6 percent to 14 percent of payroll. Employers (congregations, schools, institutions) will see this new rate on the November billing but it will be retroactive to October 1st.  “This reduction should be welcome news to congregations and we are very appreciative to the three districts for their cooperation in making this financing arrangement possible,” said Mr. Cleave.  

The board also heard some good news on the benefit side of the Worker Benefit Plans. Long term disability insurance rates paid by employees will drop 10 percent in 2012 and employer rates for life insurance will remain unchanged.

Employees and employers will each pay half of a modest increase in dental and health premiums and retirees will see a modest increase in the premiums they pay for their benefit coverage.

A convention resolution in June 2011 allowed the BOM to increase its membership. As a result the board welcomed LCC pastor Rev. Dr. Dieter Kays, retired CEO of FaithLife Financial. Previously, Rev. Kays served as an advisor to the board. The board is currently seeking two more members, one to fill a vacancy created by a current board member completing his term and the second to bring the BOM to its full complement of seven.

The next board meeting will be in March 2012 in Winnipeg.