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LCC Pension Plan stable despite ABC District CEF troubles

January 27, 2015 5 Comments

wbplogocolourWINNIPEG – Lutheran Church–Canada (LCC) President Rev. Dr. Robert Bugbee wants Synod’s professional workers and employers to know that pensions are stable despite ongoing problems reported with the Church Extension Fund (CEF) in the Alberta-British Columbia District.

“I’ve asked leaders of the LCC Worker Benefit Plans (WBP), to summarize just where we stand on this matter,” President Bugbee commented. “The insolvency of the ABC District and its CEF has caused confusion among some folks in the Synod who may fear for their pensions or for the pensions of pastors and deacons they’ve come to love. Questions have been raised, and I want to reassure people across the church in this important area.”

The following observations were provided by Dwayne Cleave, WBP Executive Director, and Dr. Dieter Kays, Chairman of the WBP Board of Managers:

  • No LCC pension plan assets are invested in any Church Extension Fund; instead, defined benefit (DB) pension plan assets are invested according to a detailed policy statement. To be clear, a loan the Worker Benefit Plans once had from the ABC District CEF during the widespread solvency problem among pension plans in order to avoid sharp increases in employer contributions has been fully repaid; in other words, the WBP owes nothing to the ABC District;
  • DB pension plan assets are allocated among four investment firms (TD Asset Management, 40%; Foyston, Gordon & Payne, 40%; Mawer Investments, 15%; Wellington Financial Fund IV, 5%);
  • Monthly pension plan contributions collected by the LCC Worker Benefit Plans from employers and employees are promptly deposited with pension plan “custodians.” (Pension plan custodian for the DB Plan is CIBC Mellon; for the DC Plan it is SunLife Financial);
  • Pension plan custodians monitor the frequency and level of contributions to ensure they meet all regulatory funding requirements;
  • LCC as the overall plan sponsor maintains regular contact with the pension plan regulators; the regulators continue to express confidence in the administration and transparency of our plan;
  • Worker Benefit Plans administration was transferred on January 1, 2015, to Ellement & Ellement Consulting of Winnipeg. This is expected to reduce operating costs without weakening customer service. Janice Otto, longtime co-worker in our WBP department, now works at Ellement & Ellement and continues as the primary contact on our accounts for workers and employers across LCC.

Dr. Kays noted, “Although we expect to send the comprehensive 2014 Worker Benefit Plan Annual Report to employers and employees on schedule in early spring, we wanted to provide these assurances now to our people throughout the Synod.” Dwayne Cleave concluded by observing, “In fact, our Worker Benefit Plans—as a financial entity of LCC—are in a corporate structure separate from the ABC District, and are not affected by the CEF difficulties there in any way. I want to stress this particularly for our pastors, deacons and congregations in the provinces of Alberta and British Columbia.”

Further information on the Lutheran Church–Canada Worker Benefit Plans for employers, workers, and retirees can be found at www.lccbenefits.ca.

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5 Comments »

  • Canadian Lutheran Online » Blog Archive » An update on the ABC District situation said:

    […] Lutheran Church–Canada released a statement reassuring professional church workers that LCC’s Pension Plan is unaffected by the current […]

  • Canadian Lutheran Online » Blog Archive » Statement on Alberta-British Columbia District Church Extension Fund said:

    […] (January 27, 2015): Lutheran Church–Canada has published a statement addressing concerns that LCC’s Pension Plan is affected by the ABC District financial […]

  • Canadian Lutheran Online » Blog Archive » CUCA moves to pension and benefit autonomy; LCC Plans remain stable said:

    […] As a footnote, LCC recently published a story addressing the concerns some plan members may have had about the financial difficulties in the ABC District and whether they were a threat to the stability of Worker Benefit coverage. That story can be found here. […]

  • Sherry Mitchell said:

    http://www.canadianlutheran.ca/benefits-board-still-battling-financial-uncertainties/

    This article states that money was borrowed from CEF in 2011 with a plan to repay it in 10 years. Full solvency was expected in 5 years (2016). For full transparency, can you please release details of that loan in terms of how much was borrowed from CEF and when it was paid back and how it came to be paid back earlier than the plan indicated in this article? Thanks!

  • canluth (author) said:

    Hi Sherry. The following answer comes from LCC’s treasurer:

    Back in 2011, the solvency funded deficit of the DB plan was $22 million dollars. Pension legislation at that time required the solvency deficit to be fully funded within 5 years. LCC did not believe that congregations would be able to sustain contributions at the level required to fund the deficit within the five-year period.

    For that reason, LCC planned to borrow $7 million dollars in total from the three district extension funds ($4 million from ABC, $2.5 million from East, and $500 thousand from Central). The purpose of the loan was to assist participating employers with the pension contributions that were required to fund the DB Pension Plan solvency deficit. The loan was essentially taken out by LCC as the plan sponsor. The combination of employer contributions and loan capital would have made it possible to fund the solvency deficit within five years but still allow congregations to amortize the payments over ten years.

    An initial drawdown of $850 thousand from the CEF provision of $7 million took place in November 2011 ($350 thousand from ABC, $250 thousand from East, and $250 thousand from Central). The $850 thousand was used by the plan sponsor to supplement participating employer pension contributions in 2012.

    However, in 2012 two significant events occurred which resulted in LCC discontinuing the planned strategy. The first event was that the long-term interest rate dropped significantly, which resulted in the pension plan deficit increasing dramatically. The second event was a response to the first in that pension regulators granted plan sponsors a moratorium from having to fund on solvency. Since LCC did not have to fund the plan on solvency, the need for additional loan capital was not required and so LCC did not need to take any additional money from the proffered loans. Interest payments on the loaned $850 thousand were paid on a monthly basis to the respective CEFs throughout the loan duration, with the principal having been paid off in full in the past six months.

    At present the DB pension plan is still in a solvency deficit position (81% funded at our last actuarial valuation). At the forbearance of Alberta’s Superintendent of Pensions, LCC is not currently required to make solvency deficit payments, though it is making going concern deficit payments.

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