Decision Number 720
SUBJECT TO FINAL EDITING
Petition from the North Alabama Conference Concerning Determination of Responsibility for Unfunded Pension Liability.
Digest
The Annual Conference is entitled to rely on the General Board of Pension and Health Benefits both as to its agreement and its actuarial figures. The Judicial Council retains jurisdiction and it remands the matter back to the parties to determine an amount which shall allow the North Alabama Conference to neither gain nor lose by virtue of the error of the General Board of Pension and Health Benefits. The parties are to advise the President of the Judicial Council in writing of the agreement reached by January 1, 1995.
Statement of Facts
This matter is before the Council on the basis of a petition from the North Alabama Conference for a declaratory decision by the Judicial Council for a determination of the party responsible for payment of Unfunded Liability under the Conference Ministerial Pension Plan.
The General Board of Pension and Health Benefits of The United Methodist Church advised the North Alabama Conference on March 30, 1992 that the Conference was required to pay $15,856,970.00 to fund the full amount of Unfunded Liability relating to a Past Service Rate of $255.00 at January 1, 1993 for service rendered by the Ministerial Pension Plan participants prior to January 1, 1982. That payment was made on December 31, 1992.
In March of 1993, a letter was sent from the General Board of Pension and Health Benefits saying that an additional $1,173,426.00 was owed.
The position of the General Board of Pension and Health Benefits is simply that they made an error.
James F. Parker, then General Secretary of the General Board of Pension and Health Benefits stated:
Unfortunately, internal communications within the board and external communications between the board and conference officials were less than accurate.
Mr. Parker, in his letter of March 5, 1994, offered the following solution to this situation:
The deposits of $1,173,426 due under the 1992 Addendum will not be made by the Conference at this time. Acturial gains (interest and mortality experience) shall be used to offset the 1992 Addendum deposit over future years at a rate of one-half of any such gains until the acturial equivalent of the deposit is satisfied. Public documents would reflect this agreement indirectly by stating unfundable liabilities in conformance with this agreement, but private communications between the board and the conference board of pensions may reflect the status of the offset if requested. In consideration of the above, the conference and/or its board of pensions shall not seek any further recourse with respect to the 1993 actuarial valuation/projection. This agreement will be kept confidential between the board and applicable conference officials. Breach of the confidentiality of this agreement shall void the stated terms.
The offer was declined by the North Alabama Annual Conference. Hence this appeal to the Judicial Council.
An oral hearing was held in Berkeley, California on October 27, 1994. Terry McElheny, Gerald Champion, and Scott Selman appeared, representing the North Alabama Annual Conference. Harry Piper, Olin Isenhour and Carl Mowery spoke for the General Board of Pension and Health Benefits.
Jurisdiction
The Judicial Council has jurisdiction under Par. 2612 of the 1992 Discipline.
Analysis and Rationale
Par. 1604.3 of the Discipline provides:
The board is authorized to receive, hold, manage, merge, consolidate, administer, and invest and reinvest, by and through its constituent corporations, all connectional pension and benefit funds. The board shall discharge its duties with respect to a plan solely in the interest of the participants and beneficiaries and for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable expenses of administering the plan, with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. The board is encouraged to invest in institutions, companies, corporations, or funds which make a positive contribution toward the realization of the goals outlined in the Social Principles of our Church, subject to other provisions of the Discipline, and with due regard to any and all special contracts, agreements, and laws applicable thereto. Among the tools the board may use are shareholder advocacy, selective divestment, and advocacy or corporate disinvestment from certain countries of fields of business.
It is fully documented that the North Alabama Conference relied on the Board of Pension and Health Benefits and its actuarial projections and had every reason to do so.
The General Board of Pension and Health Benefits is responsible for its own mistakes and cannot punish an Annual Conference for relying on the General Board. Therefore, the Judicial Council directs the General Board of Pension and Health Benefits and the North Alabama Conference to determine an amount which shall allow the North Alabama Conference to neither gain nor lose by virtue of the error of the General Board of Pension and Health Benefits.
Decision
The Annual Conference is entitled to rely on the General Board of Pension and Health Benefits both as to its agreement and its actuarial figures. The Judicial Council retains jurisdiction and it remands the matter back to the parties to determine an amount which shall allow the North Alabama Conference to neither gain nor lose by virtue of the error of the General Board of Pension and Health Benefits. The parties are to advise the President of the Judicial Council in writing of the agreement reached by January 1, 1995.