Church Pension Group experiences investment rebound
Episcopal News Service. July 29, 2010 [072910-01]
Mary Frances Schjonberg
The amount of assets the Church Pension Fund has available for benefits "rebounded well" in the past fiscal year, according to the Church Pension Group's 2010 annual report.
At the end of March 2010, the pension fund had $8.516 billion available for benefits, compared with $7.024 billion at the same time last year.
The annual report shows that the fund is required to have $6.683 billion in assets available for benefits. Thus, it has $1.833 billion more than required. That amount is up from the $576 million that the fund had in additional reserves as of March 31, 2009. At the end of the fund's 2008 fiscal year, it had $9.226 billion in assets available for benefits, $2.865 billion more than required.
The Church Pension Group provides defined-benefit pension plans for clergy and lay employees, as well as a defined-contribution plan for lay employees and other investment options. It also offers health, disability, life, long-term care and property and casualty insurance.
CPG also owns Church Publishing Inc. and sponsors the CREDO Institute, designed to give Episcopal Church clergy and lay employees opportunities to examine their lives and vocations.
While the annual report says that the Clergy Pension Plan is fully funded, with assets in excess of liabilities, the report notes that this is not the case with the lay employees' defined-benefit plan. For investment purposes, CPG recently began to co-mingle the two defined-benefit plans and that strategy is expected to assist in getting the lay plan fully funded.
"The Church Pension Fund, which is the sponsor of this plan, continues to monitor its funding status closely," according to the report. A spokesperson for CPG said it is confident that the lay defined-benefit plan can fulfill its obligations to participants.
"The CPF portfolio benefited from the global recovery. The fund's strong fiscal position and broad diversification enabled us to avoid the financial and liquidity problems that many institutional investors experienced over the past few years," the report's investment performance section says. "As a result, we were able to take advantage of opportunities presented by attractive valuations in early 2009. The fund's meaningful exposure to non-U.S. equity markets, both developed and emerging, aided performance. Our investments in credit opportunities also paid off handsomely as the year progressed."
In terms of the overall economy, the report says that even though the recession has not officially ended and unemployment is still high, "the worst does appear to be behind us."
A chart in the report shows the pension fund's performance against two benchmarks. One is a composite of 67 percent of the Standard & Poor's 500 Index and 33 percent Barclays Capital Government/Corporate bonds. The other is the fund's own investment goal of a return above inflation of 4.5 percent.
The report says that the fund's performance "compares favorably with the composite return on a three-year and ten-year basis," but notes that it fell below that benchmark compared with last year.
"The fund's diversification program acts to lessen the swings from the overall stock market so it is not unusual that we would under-perform against this benchmark in such a strong year for equities," the investment performance portion of the report says. In addition, it notes that over the two-year period ending March 31, 2010, the fund outperformed the composite benchmark.
It also noted that it exceeded its own investment objective during the past year, but lagged behind on both a three-year and 10-year basis.
"We do not know what the next several months will bring, but we believe the investment portfolio is well-positioned for the long term," the report says. "While financial market volatility can be unsettling, we continue to believe that it can provide interesting and compelling investment opportunities, and the fund's strong position allows us to take advantage of those opportunities."
For instance, the report lists as a "significant accomplishment," the fact that the Church Pension Fund opened a Hong Kong office in April 2009 "to better capitalize on the growing number of investment opportunities in Asia."
The annual report also gives a snapshot of the church's clergy and the fund's financial participation in their lives. The statistical portrait shows that:
- As of the end of 2009, there were 7,204 active fund participants, compared with 7,408 in 2007 and 7,886 in 2004. Of the 2009 total, 4,704 were male and 2,500 were female. The number of female participants has risen from the 2004 total of 2,277, while the number of male participants has declined from 5,609.
- Participants' average age was 53.6 years at the end of 2009, compared with 53.1 years at the end of 2004.
- Their average compensation was $64,871 at the end of 2009, compared with $62,546 in 2007 and $58,216 in 2004.
- Just over 7,000 people were receiving retirement benefits, with an average benefit of $29,023. That compares with 5,939 recipients in 2004 who received an average of $19,925.
- The average recipient was 74.1 years old this year, compared with an average age of 73.5 years in 2004.
- There were 2,565 surviving spouses receiving an average benefit of $19,096 this year and their average age was 78.5. In 2004, 2,516 surviving spouses were receiving an average benefit of $12,493 and their average age was 77.4.
- While the report says that information from dioceses is still incomplete for 2009, it shows that 409 people were ordained in 2009. Their average age was 50 years. In 2006, there were 534 people ordained and their average age was 48. In 2004, the 478 people who were ordained also had an average age of 48.
For the second year, CPG's annual report is not being mailed to active participants and retired recipients. It is available online here and as a PDF document here. A printed copy may also be requested via the report's website.
CPG began as a clergy pension fund when it was chartered in 1914 (it became operational on March 1, 1917). Episcopal Church clergy are required to participate and their congregations or other Episcopal Church-affiliated organizations must pay an annual assessment into the fund. The assessment is 18 percent of the clergy person's annual compensation package (which generally includes cash salary, Social Security tax reimbursements, utilities, and housing, and may also include other items that are taxable under the Internal Revenue Service Code).
The assessments are pooled and invested as a whole, as opposed to being held in individual accounts for each participant. Individual benefits are calculated based on years of credited service and highest average compensation, not the amount of money contributed on that person's behalf or on the performance of investments during the person's working life.
Clergy do not make contributions to the plan. They can invest in other CPG retirement savings funds that are similar to Individual Retirement Accounts. Clergy earnings from those investments are determined by amount of contribution and market performance of their accounts.
Congregations and affiliated organizations have not been canonically required to provide pension benefits for their lay employees. Church employers had the option of offering various pension benefit plans to those employees, including the defined-benefit plan and a defined-contribution plan designed by CPG specifically for lay employees. The employer contribution for the defined-benefit plan is 9 percent of an employee's eligible contribution.
The 76th General Convention, meeting in Anaheim, California during July 2009, established a mandatory lay employee pension system for employees who are scheduled to work a minimum of 1,000 hours annually for any domestic diocese, parish, mission or other ecclesiastical organization or body subject to the authority of the church. The explanation in Resolution A138 noted that the General Convention required such provisions in 1991 via Resolution D165, but while about 93 percent of eligible diocesan employees and 70 percent of congregational employees are covered, "many hundreds of eligible employees remain uncovered and there are considerable inequities," including discrepancies between the number of male and female employees who are covered.
Resolution A138's explanation said that the cost of pension coverage would be "on average, 6/10s of 1 percent of parish budgets, with the cost for the smallest congregations approximately 1%, which congregations are least likely to have eligible employees."