Midday Friday the ELCA News Service issued a press release in response to the suit reported in our last entry. We'll close this entry with the entire release, but we wanted to highlight a couple of quotes first.
The ELCA's public response to the suit in essence is:
"While we deny the allegations, we will not comment publicly on the specifics contained in the lawsuit so long as this matter is in litigation."No mention that we could find of the ELCA Special Needs Retirement Fund which is available to supplement those prayers.
"The ELCA remains concerned about the retirees who filed the lawsuit as we are about everyone adversely affected by the downturn in the stock market and the state of the economy. We ask everyone to keep the retirees and the church in their prayers during these difficult times," the statement said.
Meanwhile, the Board of Pensions is reported to say:
"We believe this lawsuit, brought by four individuals, lacks merit and we are vigorously defending against it," said a statement from the ELCA Board of Pensions. "The top priority of the Board of Pensions for the ELCA Participating Annuity and Bridge Fund has always been, and continues to be, providing annuity payments to participating plan members during their lifetimes.Part of the lawsuit, though, has to do with how the ELCA Board of Pensions encouraged ELCA clergy and other church workers to move their retirement funds into the annuities in the first place. As the Pioneer-Press reported in its article:
[T]he pastors' lawsuit cites years' worth of documents from the ELCA, all of them discussing the security of the pension payments in the annuity plan. A 2001 description of the annuity option says that the plan's goal was to increase participants' monthly pension income at the rate of inflation — about 3 percent to 5 percent — over many years.Granted, Shrimp isn't a lawyer, but the "breach of contract" accusation seems to be a likely focal point. Pastors converted their pension funds into annuities because they would be "safer" than leaving those funds in their BOP accounts. Annuities promised greater protection from inflation and long life. On the other hand, most of those whose pension funds remained fully invested in their BOP accounts (members have a choice of several allocations between stocks, bonds, cash, and other investment vehicles), both retirees and those still working, took a significant hit -- many greater than those who annuitized -- when the markets plummeted.
"Any increase is permanent and applies to all payments made to you, your joint annuitant and beneficiaries," the 2001 plan description said....
Like the Augsburg Fortress plan [Note: the Pioneer Press article is relating this pension suit to the Augsburg Fortress pension controversy], the ELCA pension plan also claims to be exempt from federal laws governing pensions because it's a "church plan." But the pastors' lawyer said that isn't a point of contention in their lawsuit, which alleges breach of contract on that part of the pension plan.
Shrimp has to wonder if lawyering up against each other is the best way for the ELCA and its pastors to survive this continuing economic crisis.
Meanwhile, here's the entire ELCA News release. Shrimp out:
ELCA, Board of Pensions Respond to Lawsuit on Annuity Payment Reductions
10-006-JB
CHICAGO (ELCA) -- The churchwide organization of the Evangelical Lutheran Church in America (ELCA) and the ELCA Board of Pensions responded publicly to a Dec. 3 lawsuit filed against them in a Minnesota state court by four plaintiffs. The plaintiffs claim the ELCA Board of Pensions acted improperly to reduce annuity payments to retirees participating in an annuity retirement fund.
The suit was filed in a district court in Hennepin County, Minn., by the Rev. Arthur F. Haimerl, the Rev. Benjamin A. Johnson and two former pastors, Larry D. Cartford and Dr. Ronald A. Lundeen.
Named as defendants were the ELCA Board of Pensions, based in Minneapolis, and two members of its leadership team, John G. Kapanke, president and chief executive officer, and Curtis G. Fee, vice president and chief investment officer. The ELCA, a separate nonprofit corporation based here, was also named.
"The Evangelical Lutheran Church in America is aware of the allegations contained in the lawsuit filed in the Minnesota District Court," according to a statement from the ELCA churchwide organization. "The lawsuit claims that the ELCA Board of Pensions, a corporation separate from the churchwide organization, acted improperly by reducing certain annuity payments. We are disappointed the plaintiffs chose to name the ELCA as a defendant in this matter. While we deny the allegations, we will not comment publicly on the specifics contained in the lawsuit so long as this matter is in litigation."
"The ELCA remains concerned about the retirees who filed the lawsuit as we are about everyone adversely affected by the downturn in the stock market and the state of the economy. We ask everyone to keep the retirees and the church in their prayers during these difficult times," the statement said.
In 2009 the ELCA Board of Pensions informed about 12,500 retirees in the Participating Annuity and Bridge Fund that, because of significant market losses, their annuity payments would be reduced 9 percent for 2010, and would likely be reduced further by 9 percent in 2011 and 2012.
The reductions were needed because the Participating Annuity and Bridge Fund suffered significant market losses in late 2008 and early 2009, resulting in a funding shortfall of as much as 39 percent in February 2009. To ease the impact on plan members, the trustees decided to implement reductions over a three-year period.
Last month the trustees of the Board of Pensions announced smaller 2011 reductions in annuity payments for plan members in its Participating Annuity and Bridge Fund, primarily because of positive market performance in recent months. The trustees reduced annuity payments for 2011 by 6 percent instead of 9 percent for plan members in the Participating Annuity and Bridge Fund.
In the lawsuit the plaintiffs alleged that the defendants' actions were not proper and not permitted based on the terms of the retirement plan agreement. The plaintiffs claimed that "annuity payments were guaranteed for life" and that "increases in these guaranteed lifetime annuity payments would be permanent."
Earlier this month the Board of Pensions caused the lawsuit to be moved to the federal court in Minneapolis.
"We believe this lawsuit, brought by four individuals, lacks merit and we are vigorously defending against it," said a statement from the ELCA Board of Pensions. "The top priority of the Board of Pensions for the ELCA Participating Annuity and Bridge Fund has always been, and continues to be, providing annuity payments to participating plan members during their lifetimes.
"In January 2010, as a result of the historic and virtually unprecedented downturn in the investment markets in late 2008 and 2009, the Board of Pensions implemented a three-year plan of corrective measures to protect the long-term viability of the Fund for its participating plan members. The Board of Pensions believes it has acted in the best interests of plan members by seeking to return the Fund to fully funded status. The steps implemented by the Board of Pensions are intended to support continued annuity payments to participating plan members during their lifetimes. Currently we are on track to return the Fund to a fully funded status, due primarily to improved investment market performance and the action we have taken in our stewardship of the Fund," the Board of Pensions statement said.
For information contact:
John Brooks, Director (773) 380-2958 or news@elca.org
http://www.elca.org/news
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2 comments:
Clam rarely finds himself coming to the defense of the institutional ELCA, but he does wonder what exactly the plaintiffs here think was the alternative to what happened. The funds backing the annuities shrank dramatically in the market downturn in 2008-09. The BoP can't create funds it doesn't have. And the ELCA sure doesn't have the money. So what do they think should have happened?
The chief question that comes to our little mind is: Did the ELCA-BoP "sell" these annuities to pastors with the same sort of due diligence on behalf of the clients that is expected of other insurance companies?
We have never been in a one-on-one with any of the BoP representatives who are (well, were) at most large gatherings of ELCA clergy to hype this option. But we have heard the general sales pitch that focusses on the additional protection and safety in moving retirement funds out of one's pension account and into these annuities. And we are curious if similar annuities from other institutions have had to engage in similar drastic reductions.
Now to be clear we think, given the effects of the financial panic, the BoP did the best they could. And given they seemed to be doing very well for ELCA pastors' retirements before the panic struck, we are inclined to give the BoP the benefit of our doubt. It's is certainly better to take a cut now at this end rather than keep the full payments going for now knowing that they're going run out of money before the annuities expire.
As for the ELCA, why did it take nearly a year before action was taken on behalf of these pastors via the Special Needs Retirement Fund? Here the ELCA has had, almost from its beginnings in the 1990s, the perfect vehicle for drawing attention to the now increased needs of the church's retirees (both ELCA pastors and lay workers, and retirees of Augsburg Fortress) and calling on congregations and parishioners to "help take care of our own." Instead, all we hear is lawyering up, noting that the other parties are separated incorporated, "so it's someone else's responsibility."
That is the sort of betrayal that leads to lawsuits like this.
Then again, given all the other betrayals by ELCA leadership these years, what else should we expect...
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