Decision Number 955
SUBJECT TO FINAL EDITING
October 24, 2002
Review of Bishop's Decision of Law in the East Ohio Annual Conference on the Constitutionality of the 2001 East Ohio Conference Action to Use Interest from Capital Raised to Fund Pre-82 Pension Liability for the Purpose of Partially Funding Health Care Costs And/or Replenishing the Health Care Reserve Account for Conference Claimants.
Digest
According to Decision 33, a bishop is not allowed to rule when the question of law does not cite a specific action that has violated a particular paragraph in the 2000 Discipline. The ruling of Bishop Jonathan L. Keaton that the question is moot is affirmed.
Statement of Facts
On June 20, 2002, in a regular session of the East Ohio Annual Conference, a conference member presented the following question of law:
In accordance with ¶ 49 and ¶1506.8 of the 2000 Book of Discipline, I request an Episcopal ruling on the constitutionality of the 2001 East Ohio Conference action to use interest from capital raised to fund Pre-82 pension liability as referred to on page 69, lines 16-24 of the 2002 pre-conference workbook, for the purpose of partially funding health care costs and/or replenishing the health care reserve account for conference claimants.
Bishop Keaton replied to the question of law within 30 days after the close of the session.
Jurisdiction
The Judicial Council has jurisdiction under ¶ 2609.6 of the 2000 Discipline.
Analysis and Rationale
In the bishop's response to the question put to him, the bishop pointed out that ¶ 49 deals with the bishop's obligation to decide all questions of law coming before the bishop in the regular business of a session. He further noted that ¶ 1506.8 requires "each annual conference to develop, adopt and implement a formal funding plan on or before July 15, 2002, for retiring its pre-1982 pension obligations." In giving his ruling of law, the bishop noted that the question of law posed to him did not cite a specific action that violated the two specific paragraphs stated in the so-called question of law. Therefore, Bishop Keaton ruled that the question of law is moot and should not be decided in keeping with Decision 33. The bishop also could refuse to rule
Decision
According to Decision 33, a bishop is not allowed to rule when the question of law does not cite a specific action that has violated a particular paragraph in the 2000 Discipline. The ruling of Bishop Jonathan L. Keaton that the question is moot is affirmed.
Concurring Opinion
We agree with our colleagues that the bishop was correct in his decision of law. In our polity bishops cannot make rulings on issues of constitutionality; this is solely the responsibility of the Judicial Council. We further agree that the questions were moot and thus barred under the guidelines first outlined in Decision 33. However, we also conclude there are significant issues raised by the precedent that has been set in the East Ohio Annual Conference regarding the use of funds raised to pay pre-1982 pension obligations. At issue is whether the East Ohio Annual Conference is bound to the stated purposes of the use of a Capital Funds Account that was designed to provide for designated annual conference capital expenditures and pension obligations for clergy with years of service prior to 1982. The action was designed to fulfill the requirements specified in ¶ 1506.8 of the 2000Discipline that requires every annual conference to develop and implement a funding plan for retiring pre-1982 pension obligations on or before December 31, 2021. The deadline for the development and implementation of this plan was July 15, 2002. The East Ohio Conference was diligent in fulfilling the obligations of developing and implementing a plan within the Disciplines prescribed time line. The East Ohio Annual Conference has fulfilled this obligation and has developed a plan designed to ultimately address the pre-1982 pension obligations.
Under the provisions of ¶ 604.13 the annual conference is authorized to set forth a plan for funding salaries and other compensatory elements. The East Ohio Annual Conference attempted to fulfill this general responsibility in addition to responding to the obligation of retiring pre-1982 pension obligations. In Decision 923 we determined that the North Georgia Health Insurance Program funding plan requiring active participants to fund unfunded liability for the Retirees Supplemental Insurance Benefits Plan was void. In effect that plan would have used active clergy benefits to supplement unfunded liability for retirees.
The compensatory benefit for pre-1982 service was mandated under the requirement of ¶ 1506.8. In fulfilling this obligation it appears that the annual conference as well as the General Board of Pension and Health Benefits has projected what the actual cost of the program will be once the entire pre-1982 pension obligations have been fulfilled. Each year the General Board of Pension and Health Benefits calculates the value of each annual conferences liability regarding its obligation to clergy with pre-1982 service, both currently retired as well as active clergy. Furthermore, when the Capital Funds Plan was initiated the understanding was that $13,063,828 would cover the unfunded liability as long as certain provisions were met by the East Ohio Annual Conference, fully funding and paying through apportionments, the annual annuity rate increase and post-1982 pension obligations. In 1992 it was determined that the projected need for the payment of pre-1982 pension obligations was adjusted to $7,048,062; this change was due to positive actuarial developments and stock market gains.
According to the annual conference audit report the East Ohio Annual Conference through the conference council on finance and administration and board of pension and health benefits decided to contribute annually, a computed amount based on a 15-year amortization term including yearly interest charges of 6 % on the unpaid commitment. Thus the East Ohio Annual Conference makes annual payments to the pre-1982 debt. In the present context the payment of the pre-1982 pension obligations are exposed to the speculative and volatile nature of financial markets and potential actuarial changes. This situation begs for the East Ohio Annual Conference to provide for contingencies particularly in light of present market conditions and potential actuarial adjustments.
One of the responsibilities of the General Board of Pension and Heath Benefits is to annually compute the amount that is to be paid by the annual conference in order to meet the requirements of the pension and benefits program of the conference. Paragraph 1507 of the 2000 Discipline spells out the obligations of the board of pension and health benefits. Furthermore, in Decision 720, the Judicial Council determined that [t]he Annual Conference is entitled to rely upon the General Board of Pension and Health Benefits both as to its agreement and its actuarial figures. Under the East Ohio Annual Conference regime, actuarial calculations are done annually and could change from year to year. Therefore, it is incumbent upon the annual conference to provide for contingencies particularly in this context where it has selected to pay down the obligation over a period of 15 years.
In Decision 50 The Judicial Council ruled that an annual conference could set an apportionment provision for conference pension claimants but any excess amount raised by such apportionment could be used to create a reserve fund for future years. In 2001 the East Ohio Annual Conference redesignated its Pension Reserve Account that provided for pre-1982 pension liabilities. The fund became The Pension and Health Care Reserve Account. The accounts purpose evolved to provide for both conference pension reserves and health care plan liabilities in the East Ohio Annual Conference. Following the logic of Decision 50 it is appropriate for the East Ohio Annual Conference to utilize funds from the Capital Funds Drive to provide for pre-1982 pension obligations and any reserves needed to assure that the obligations will be met.
With respect to using these interest funds to provide for health insurance contingencies there are problems that must be addressed. We commend the East Ohio Annual Conference for its efforts. The annual conference devised a plan that would limit the necessity of raising apportionment obligations in order to pay health care liability. However, we think that under the present framework using funds generated from resources that were raised to provide primarily a benefit to those pastors with pre-1982 service is inappropriate. The use of interest that has been generated from the principle designed to assist pastors with pre-1982 service must be consistent with the original intent. Therefore, in the instance where pre-1982 pension obligations still exist, we would find that the East Ohio Annual Conference must provide a reserve fund to address any contingencies or unanticipated developments. Furthermore, in expanding the use of interest for health care benefits we would find that these resources should only benefit pastors with pre-1982 service. This is consistent with what we decided in Decision 923 where we stated that health care benefits are part of the compensatory consideration of clergy. The funds raised by the East Ohio Annual Conference were dedicated for the pension liability of pre-1982 service. If interest is used for health care benefits, in our minds, it must also be dedicated to those clergy who have service time prior to 1982. Furthermore, it is our opinion that these funds should not be used to provide benefits for other clergy or lay staff of the annual conference. These funds were generated as compensatory benefits for clergy with service prior to 1982. Only after the pension obligations are fulfilled to individual clergy, spouses and dependents would the annual conference be justified in designating another use for these interest funds. If this case were before us procedurally we would restrict the East Ohio Annual Conference from using interest from funds established to pay pre-1982 clergy pension obligations.
Larry Pickens
Rodolfo C. Beltran
Keith D. Boyette
James W. Holsinger
Under the provisions of ¶ 604.13 the annual conference is authorized to set forth a plan for funding salaries and other compensatory elements. The East Ohio Annual Conference attempted to fulfill this general responsibility in addition to responding to the obligation of retiring pre-1982 pension obligations. In Decision 923 we determined that the North Georgia Health Insurance Program funding plan requiring active participants to fund unfunded liability for the Retirees Supplemental Insurance Benefits Plan was void. In effect that plan would have used active clergy benefits to supplement unfunded liability for retirees.
The compensatory benefit for pre-1982 service was mandated under the requirement of ¶ 1506.8. In fulfilling this obligation it appears that the annual conference as well as the General Board of Pension and Health Benefits has projected what the actual cost of the program will be once the entire pre-1982 pension obligations have been fulfilled. Each year the General Board of Pension and Health Benefits calculates the value of each annual conferences liability regarding its obligation to clergy with pre-1982 service, both currently retired as well as active clergy. Furthermore, when the Capital Funds Plan was initiated the understanding was that $13,063,828 would cover the unfunded liability as long as certain provisions were met by the East Ohio Annual Conference, fully funding and paying through apportionments, the annual annuity rate increase and post-1982 pension obligations. In 1992 it was determined that the projected need for the payment of pre-1982 pension obligations was adjusted to $7,048,062; this change was due to positive actuarial developments and stock market gains.
According to the annual conference audit report the East Ohio Annual Conference through the conference council on finance and administration and board of pension and health benefits decided to contribute annually, a computed amount based on a 15-year amortization term including yearly interest charges of 6 % on the unpaid commitment. Thus the East Ohio Annual Conference makes annual payments to the pre-1982 debt. In the present context the payment of the pre-1982 pension obligations are exposed to the speculative and volatile nature of financial markets and potential actuarial changes. This situation begs for the East Ohio Annual Conference to provide for contingencies particularly in light of present market conditions and potential actuarial adjustments.
One of the responsibilities of the General Board of Pension and Heath Benefits is to annually compute the amount that is to be paid by the annual conference in order to meet the requirements of the pension and benefits program of the conference. Paragraph 1507 of the 2000 Discipline spells out the obligations of the board of pension and health benefits. Furthermore, in Decision 720, the Judicial Council determined that [t]he Annual Conference is entitled to rely upon the General Board of Pension and Health Benefits both as to its agreement and its actuarial figures. Under the East Ohio Annual Conference regime, actuarial calculations are done annually and could change from year to year. Therefore, it is incumbent upon the annual conference to provide for contingencies particularly in this context where it has selected to pay down the obligation over a period of 15 years.
In Decision 50 The Judicial Council ruled that an annual conference could set an apportionment provision for conference pension claimants but any excess amount raised by such apportionment could be used to create a reserve fund for future years. In 2001 the East Ohio Annual Conference redesignated its Pension Reserve Account that provided for pre-1982 pension liabilities. The fund became The Pension and Health Care Reserve Account. The accounts purpose evolved to provide for both conference pension reserves and health care plan liabilities in the East Ohio Annual Conference. Following the logic of Decision 50 it is appropriate for the East Ohio Annual Conference to utilize funds from the Capital Funds Drive to provide for pre-1982 pension obligations and any reserves needed to assure that the obligations will be met.
With respect to using these interest funds to provide for health insurance contingencies there are problems that must be addressed. We commend the East Ohio Annual Conference for its efforts. The annual conference devised a plan that would limit the necessity of raising apportionment obligations in order to pay health care liability. However, we think that under the present framework using funds generated from resources that were raised to provide primarily a benefit to those pastors with pre-1982 service is inappropriate. The use of interest that has been generated from the principle designed to assist pastors with pre-1982 service must be consistent with the original intent. Therefore, in the instance where pre-1982 pension obligations still exist, we would find that the East Ohio Annual Conference must provide a reserve fund to address any contingencies or unanticipated developments. Furthermore, in expanding the use of interest for health care benefits we would find that these resources should only benefit pastors with pre-1982 service. This is consistent with what we decided in Decision 923 where we stated that health care benefits are part of the compensatory consideration of clergy. The funds raised by the East Ohio Annual Conference were dedicated for the pension liability of pre-1982 service. If interest is used for health care benefits, in our minds, it must also be dedicated to those clergy who have service time prior to 1982. Furthermore, it is our opinion that these funds should not be used to provide benefits for other clergy or lay staff of the annual conference. These funds were generated as compensatory benefits for clergy with service prior to 1982. Only after the pension obligations are fulfilled to individual clergy, spouses and dependents would the annual conference be justified in designating another use for these interest funds. If this case were before us procedurally we would restrict the East Ohio Annual Conference from using interest from funds established to pay pre-1982 clergy pension obligations.
Larry Pickens
Rodolfo C. Beltran
Keith D. Boyette
James W. Holsinger