WELS Retirement Program – Proposed Changes – FAQ

SUMMARY

It is proposed that the WELS Pension Plan (the “Pension Plan”) be frozen on December 31, 2020, which means that no new benefits will be earned under the Pension Plan for any service performed after December 31, 2020.  Beginning January 1, 2021, eligible workers will be provided with contributions to be used for retirement benefits through a defined contribution plan.

After an extensive and prayerful study of many options, these changes are recommended because the defined contribution plan will better support our workers and our overall ministry efforts than the Pension Plan. Under the proposed defined contribution plan, workers will receive meaningful contributions for retirement benefits at costs that are stable over time for sponsoring organizations.

CURRENT WELS RETIREMENT PROGRAM

The Pension Plan is a defined benefit plan. Called workers serving at WELS sponsoring organizations, and lay workers serving at the WELS Center for Mission and Ministry and the four ministerial education schools who were hired prior to 2015, automatically participate in the Pension Plan if they are employed at least half-time (i.e., are regularly scheduled to work at least 20 hours per week). Participating workers earn credit toward their future Pension Plan benefit while they are actively serving and receive a monthly benefit from the Pension Plan while they are retired. Sponsoring organizations pay the cost of the Pension Plan on behalf of their workers.

As a defined benefit plan, the Pension Plan defines the benefit the worker and/or his or her surviving spouse will receive in retirement by utilizing a formula that includes each worker’s years of eligible WELS service. The sponsoring organization contributions, which are needed to fund the promised benefits, will fluctuate over time based on many factors, including the Pension Plan’s investment returns and the lifespans of retirees. The contributions funding these benefits for all workers are placed into one group trust and managed by the WELS Retirement Program Commission. Once earned, a worker’s Pension Plan benefit will not increase or decrease based on the Pension Plan’s investment returns or the worker’s lifespan.

The WELS Shepherd Plan (the “Shepherd Plan”) is a defined contribution plan. Called workers and lay workers serving at WELS sponsoring organizations are eligible to participate in the Shepherd Plan if they are expected to work at least 20 hours per week. Participating workers can save and invest their own income during their working years to provide an account balance they can access during their retirement years.

As a defined contribution plan, the Shepherd Plan defines the amount of contributions made by the sponsoring organization and the worker into the worker’s own retirement account. The worker’s retirement account is managed by the worker, and the account balance will fluctuate throughout his or her working years and retirement years based on many factors, including the contributions made to his or her account, the account’s investment returns, distributions from the account, and fees deducted from the account balance.

PROPOSED WELS RETIREMENT PROGRAM

The sponsoring organization for each worker in eligible service will send a quarterly retirement payment to the WELS Benefit Plans Office, similar to how Pension Plan payments are currently remitted. A contribution will be deposited into the defined contribution plan account of each eligible worker on a quarterly basis.

Eligibility for workers to receive the contributions under the proposed defined contribution plan is intended to be the same as eligibility for workers to participate in the Pension Plan.  Generally, eligibility includes called workers serving at WELS sponsoring organizations, and lay workers serving at the WELS Center for Mission and Ministry (CMM) and the four ministerial education schools who were hired prior to 2015, who are employed at least half-time.

Lay workers serving at the CMM and the four ministerial education schools who were hired during 2015 or later, and lay workers serving at other WELS sponsoring organizations, will not be eligible to receive the contributions under the proposed defined contribution plan.  The proposed changes are not intended to affect any other employer contribution arrangements under the Shepherd Plan, including for lay workers serving at the CMM and the four ministerial education schools who were hired during 2015 or later.

Yes.

Beginning January 1, 2021, all workers will receive a “base” contribution of $500 per quarter of eligible full-time service. In addition to the base contribution, workers who have attained age 44 on January 1, 2021 will receive an “additional” contribution per quarter of eligible full-time service as shown below.

Worker’s Age on 1/1/2021 Quarterly Additional Contribution Worker’s Age on 1/1/2021 Quarterly Additional Contribution Worker’s Age on 1/1/2021 Quarterly Additional Contribution
44 $25.00 51 $187.50 58 $375.00
45 $37.50 52 $212.50 59 $400.00
46 $62.50 53 $243.75 60 $437.50
47 $87.50 54 $275.00 61 $468.75
48 $112.50 55 $300.00 62 $500.00
49 $137.50 56 $325.00 63 $531.25
50 $162.50 57 $350.00 64 $562.50
65 or over $600.00

The quarterly “total retirement payment” charged to sponsoring organizations in 2021 will be:

  • $1,132 per full-time worker;
  • $849 per three-quarter-time worker; and
  • $566 per half-time worker.

These amounts are the same as the quarterly Pension Plan contribution rates in 2020.

Notice: The contribution rate charged to a sponsoring organization will not vary due to a worker’s receipt of additional contributions based on age.

In consultation with the actuaries, the additional contribution schedule was designed with the intent of having the projected defined contribution plan account balance at retirement (plus the Pension Plan benefit earned on the Pension Plan’s freeze date) for each worker to be at least as valuable (based on actuarial assumptions) as the Pension Plan benefit that the worker would have earned at retirement if the Pension Plan had not been frozen.

The value of a worker’s Pension Plan benefit increases as the worker gets closer to retirement. Contributions made to the defined contribution plan account of a worker who is closer to retirement do not have as much time to earn investment returns before the worker retires to replace the Pension Plan benefit that the worker would have earned had the worker remained in the Pension Plan. The additional contributions are estimated to at least replace the Pension Plan benefits that workers would have earned if the Pension Plan had not been frozen.

The actuaries estimated that workers who are younger than age 44 on January 1, 2021, as well as workers who have not entered the ministry by January 1, 2021, will accumulate a defined contribution plan account balance at retirement (plus any Pension Plan benefit earned on the Pension Plan’s freeze date) that is at least as valuable (based on actuarial assumptions) as the Pension Plan benefit that the worker would have earned at retirement if the Pension Plan had not been frozen.

No. The additional contribution will be set for each worker based on his or her age on January 1, 2021 and will not increase as the worker attains a new age.

  • Example 1: A full-time worker who is age 57 on January 1, 2021 and attains age 58 on May 1, 2021 will receive a $500.00 base contribution and a $350.00 additional contribution for each quarter in 2021.
  • Example 2: A full-time worker who is age 43 on January 1, 2021 and attains age 44 on February 1, 2021 will receive a $500.00 base contribution for each quarter in 2021 but will not receive an additional contribution for any quarter in 2021.

No. The additional contribution will be set for each worker based on his or her age on January 1, 2021 and will not increase in a future plan year.

  • Example 1: A full-time worker who is age 57 on January 1, 2021 and attains age 58 on May 1, 2021 will receive a $500.00 base contribution and a $350.00 additional contribution for each quarter in 2021 and 2022.
  • Example 2: A full-time worker who is age 43 on January 1, 2021 and attains age 44 on February 1, 2021 will receive a $500.00 base contribution for each quarter in 2021 and 2022 but will not receive an additional contribution for any quarter in 2021 or 2022.

The base and additional contributions shown above will be pro-rated for part-time service. A worker serving three-quarter-time will receive 75% of the base and, if applicable, additional contribution shown above. A worker serving half-time will receive 50% of the base and, if applicable, additional contribution shown above. A worker serving less-than-half-time will not receive a contribution.

The contributions will be deposited to your defined contribution plan account within 30 days of the last day of each calendar quarter. For example, the contribution for the quarter beginning on January 1, 2021 will be deposited to your defined contribution plan account by April 30, 2021.

Most likely, yes. Although the future is uncertain and changes cannot be guaranteed, the intent is to gradually increase the base contribution when appropriate after considering various factors, such as inflation and cost of living. The additional contribution amounts are not intended to be changed.

The base contribution will be considered annually, and workers and sponsoring organizations will be informed of any changes to the base contribution at least 30 days prior to the effective date of the change.

The contributions to your defined contribution plan account will end when you are no longer serving at a WELS sponsoring organization or are serving on a less-than-half-time basis, or the defined contribution plan is amended to discontinue the contributions.

The contributions to your defined contribution plan account will resume as of the first day of the calendar quarter following the date you return to eligible service on at least a half-time basis. If you were receiving an additional contribution before your prior service ended and you return to eligible service on at least a half-time basis within two years of the date your prior service ended, the additional contribution will also resume.

Yes. However, formal and robust procedures will be established to quickly identify late payments and to work with sponsoring organizations and district leaders, as necessary, to resolve these situations.

You can choose your own fund(s) and/or portfolio from the options available in the defined contribution plan based on your own personal goals. If you do not make an investment election, your account will be invested in the default investment option, which will be the target retirement date fund that most closely aligns with your projected retirement date based on your age.

A target retirement date fund is a mutual fund that offers a diversified portfolio within a single fund that adjusts its underlying asset mix over time to gradually decrease exposure to stocks and increase exposure to bonds as the target retirement date approaches.

Yes. The defined contribution plan will offer a variety of investment funds and portfolios from which you can select to customize the investments in your account. The current list of investment funds and portfolios available in the Shepherd Plan is available on the Benefit Plans Office website here: https://welsbpo.net/retirement/shepherd-plan/investment-options/.

The contributions to your defined contribution plan account will vest immediately at the time the contributions are deposited to your defined contribution plan account. There will be no five-year vesting requirement like there is in the Pension Plan.

Generally, you will be able to withdraw contributions from your defined contribution plan account when your service at a WELS sponsoring organization ends or when you attain age 65, whichever happens earlier.

Yes, for workers considered ministers for federal tax purposes by the Internal Revenue Service, subject to the limits of amounts that can be excluded under IRC Section 107.

Yes. You can save and invest your own income in the defined contribution plan to be used for your retirement needs.

Yes, your sponsoring organization can also contribute to the defined contribution plan for your retirement needs.

The contributions beginning January 1, 2021 will be added to your existing Shepherd Plan account. A new account will not be created for you, so you will not need to manage two Shepherd Plan accounts. The contributions will appear as a new “source” of contributions to your account, and you can track and manage accordingly.

Beginning January 1, 2021, neither you nor your sponsoring organization will be able to make new contributions based on your WELS service to an employer-sponsored retirement plan that is not the Shepherd Plan. Subject to applicable IRS rules, you may be able to move to the WELS defined contribution plan any other employer-sponsored retirement plan account that was created before January 1, 2021, in accordance with the terms of that plan.

Yes. The proposed changes will not affect your ability to utilize an individual retirement account.

PENSION FREEZE

The Pension Plan will be frozen on December 31, 2020. “Frozen” means that no new benefits will be earned under the Pension Plan for any service performed after December 31, 2020. The Pension Plan will pay benefits earned for service performed through December 31, 2020 to retired workers and their surviving spouses in accordance with the terms of the Pension Plan.

Yes. After your WELS service ends, the Pension Plan will pay the benefit you earned for service performed through December 31, 2020. If you die before you begin receiving your Pension Plan benefit, your surviving spouse (if you are married when you die) will be able to receive surviving spouse benefits from the Pension Plan.

Workers who have earned credit toward their future Pension Plan benefit but have not met the Plan’s five-year vesting requirement as of December 31, 2020, and are working in eligible service at a WELS sponsoring organization on December 31, 2020, will automatically be vested for the amount of Pension Plan benefits earned for eligible service performed through December 31, 2020.

Workers who begin service after December 31, 2020 will receive contributions to their defined contribution plan accounts as described above.

No.

No.

It has not yet been determined if a lump sum opportunity will be offered for participants to receive a lump sum payment from the Pension Plan in lieu of monthly benefit payments payable for life. If a lump sum opportunity is offered, the opportunity will be communicated in advance to eligible participants.

IMPORTANT DIFFERENCES BETWEEN THE PENSION PLAN AND THE PROPOSED DEFINED CONTRIBUTION PLAN

Are the Pension Plan benefits guaranteed to be paid for the life of the retired worker and the retired worker’s surviving spouse? Are the defined contribution account balances guaranteed to be paid for the life of the retired worker and the retired worker’s surviving spouse?
Yes.  Pension Plan benefits are paid in the form of a monthly annuity for the life of the retired worker and, if elected, the retired worker’s surviving spouse. No.  Each worker’s defined contribution account balance will change over time based on his or her own contributions, investment returns, distributions, and fees.
Can a retired worker elect to receive Pension Plan benefits in the form of a lump sum, or vary the amount of Pension Plan benefits received per month? Can a retired worker elect to receive distributions from the defined contribution plan in the form of a lump sum, or vary the amount of distributions from the defined contribution plan per month?
No.  Pension Plan benefits are currently payable only in the form of a monthly annuity payable for the life of the retired worker and, if elected, the retired worker’s surviving spouse.  The monthly benefit amount remains fixed for the participant’s life unless an applicable increase is approved. Yes.  A retired worker generally has the flexibility to customize the distributions received from his or her defined contribution plan account based on his or her needs in retirement.  This includes receiving distributions in the form of a lump sum or varying the amount and timing of periodic distributions.
After a retired worker has been called to heaven, can that retired worker’s Pension Plan benefit be passed on to his or her surviving spouse? After a retired worker has been called to heaven, can that retired worker’s defined contribution plan account balance be passed on to his or her surviving spouse?
Yes.  If the worker elected a surviving spouse benefit, the surviving spouse of a retired worker receives a Pension Plan benefit for the amount of time that the spouse survives the retired worker. Yes.  The defined contribution plan permits a worker to designate a beneficiary (or beneficiaries) to inherit that worker’s defined contribution plan account balance when the worker is called to heaven.
After a retired worker has been called to heaven, can that worker’s Pension Plan benefit be included in his or her estate? After a retired worker has been called to heaven, can that worker’s defined contribution plan account balance be included in his or her estate?
No.  The only survivor to whom a retired worker’s Pension Plan benefit may be passed is that worker’s surviving spouse.  A Pension Plan benefit may not be included in a worker’s estate. Yes.  A worker’s defined contribution plan account balance may be included in his or her estate and thereby passed to the worker’s spouse, family members, and other charitable or church beneficiaries.
Can a worker change how his or her Pension Plan benefit is invested, either while actively serving or while retired? Can a worker change how his or her defined contribution plan account balance is invested, either while actively serving or while retired?
No.  A worker does not have an individual account in the Pension Plan.  Contributions for all workers are placed into the Pension Plan trust and managed by the WELS Retirement Program Commission. Yes.  Each worker is responsible to manage his or her own defined contribution plan account throughout his or her life.  Each worker has the flexibility to invest his or her defined contribution plan account balance among the investment funds and portfolios available within the defined contribution plan.
Can a worker’s Pension Plan benefit increase while he or she is actively serving or while retired because of positive investment returns? Can a worker’s defined contribution plan account balance increase while he or she is actively serving or while retired because of positive investment returns?
No.  Once earned, a worker’s Pension Plan benefit does not increase or decrease based on the Pension Plan’s investment returns. Yes.  Because the worker manages his or her own defined contribution plan account, the account balance can increase due to positive investment returns.
Can a worker’s Pension Plan benefit decrease while he or she is actively serving or while retired because of negative investment returns? Can a worker’s defined contribution plan account balance decrease while he or she is actively serving because of negative investment returns?
No.  Once a Pension Plan benefit is earned by a worker, the worker will receive that benefit in retirement, regardless of the Pension Plan’s investment returns. Yes.  Because the worker manages his or her own defined contribution plan account, the account balance can decrease due to negative investment returns.
Does a worker become vested for a Pension Plan benefit immediately when he or she begins serving at a WELS sponsoring organization? Do the contributions made to a worker’s defined contribution plan account immediately vest when the contributions are deposited?
No.  A worker must perform eligible service on at least a half-time basis for at least five years at a WELS sponsoring organization to vest for a future Pension Plan benefit. Yes.  Contributions to a worker’s defined contribution plan account will vest immediately and thereby become owned by the worker when the contributions are deposited.

NEXT STEPS FOR WORKERS

An online tool has been prepared for you to compare your projected total retirement benefits available at retirement age if the Pension Plan is frozen versus if the Pension Plan is not frozen. The tool is available on this web page:
https://wels.net/retirement-benefit-calculator

You are encouraged to thoughtfully and prayerfully consider the proposed changes and how they will affect you, your family and your ministry, both now and in the future. Please visit the online comparison tool and submit any questions using the information provided below.

Additional information will be provided in the Report to the Twelve Districts, which will be available in May 2020. The proposed changes will also be presented and discussed at each district convention in June 2020.

Retirement planning resources are available from wide variety of sources. The Hahn Financial Group is the plan advisor for the Shepherd Plan and can assist with your retirement planning. To learn more, you may contact the Hahn Financial Group at:

1-800-516-4246
wels403b@hahnfinancialgroup.com
www.hahnfinancialgroup.com

Please submit all questions regarding the proposed changes using the online form available at:
https://welsbpo.net/retirement-feedback

SPONSORING ORGANIZATIONS

The quarterly “total retirement payment” charged in 2021 will be:

  • $1,132 per full-time worker;
  • $849 per three-quarter-time worker; and
  • $566 per half-time worker.

These amounts are the same as the quarterly Pension Plan contribution rates in 2020.

Notice: The contribution rate charged to a sponsoring organization will not vary due to a worker’s receipt of additional contributions based on age.

The total retirement payment will be billed on a quarterly basis, which matches the current Pension Plan billing frequency.

A sponsoring organization will be obligated to remit the applicable quarterly total retirement payment for each worker in eligible service at that sponsoring organization on the first day of each calendar quarter. This matches the current Pension Plan billing procedure.

The WELS Benefit Plans Office will bill the total retirement payment to each sponsoring organization in the same way that Pension Plan contributions are currently billed. Approximately 10-15 days before the first day of calendar quarter each sponsoring organization will receive an invoice that includes the total retirement payment amount due. Payment of the total retirement payment will be due on the first day of each calendar quarter. Payments will be remitted to the Benefit Plans Office lockbox.

Yes.

The amount needed to fund the contributions to workers’ defined contribution plan accounts will be submitted to the defined contribution plan. The remainder will be used to pay the frozen Pension Plan benefit obligations and the administrative expenses of both plans.

Most likely, yes.  The WELS Retirement Program Commission will carefully review the rates each year to determine if a change is appropriate based on many factors, including potential changes to the base contribution to workers’ defined contribution plan accounts and the Pension Plan’s financial position.

Ultimately, the goal is to reduce the total retirement payment rates to only the level needed to fund the contributions to workers’ defined contribution plan accounts plus the plan’s administrative expenses.  One of the main advantages of a defined contribution plan is that the costs to sponsoring organizations are expected to be stable over time and therefore preserve assets for ministry.  The lower cost level may be feasible after the Pension Plan’s financial position has improved.

No. All WELS sponsoring organizations will be required to join the WELS defined contribution plan effective January 1, 2021 and attest that they do not sponsor any other employer-based retirement plans (except for the Pension Plan). As a result, the only employer-based retirement plan to which workers will be able to make new contributions based on their WELS service beginning January 1, 2021 will be the WELS defined contribution plan.

Please submit all questions regarding the proposed changes using the online form available at:
https://welsbpo.net/retirement-feedback

2020 DISTRICT CONVENTIONS

The proposed changes will be a significant topic on the agenda at each district convention in June 2020. A standard resolution will be provided for each district to review, discuss and vote on during the convention. The plan is for a representative familiar with the proposed changes to attend each district convention. If each district approves the resolution with broad consensus, the proposed changes will likely be implemented on January 1, 2021.

Where should I go if I have additional questions?

Please submit all questions regarding the proposed changes using the online form.

Disclaimer

This summary of retirement benefits for workers at WELS sponsoring organizations and participants of the WELS Pension Plan and/or WELS Shepherd Plan (the “Plans”) is meant only as a brief description of some of the plans and benefits for which workers at WELS sponsoring organizations and participants of the Plans may be eligible.  Please refer to the official documents constituting the Plans for more complete descriptions.  If there is a conflict between this summary and the terms and conditions in the official documents constituting the Plans, the official documents will govern.  WELS reserves the right to amend any of its plans or benefits at its discretion.