News Release -- 2004

Brethren Benefit Trust Board takes action
on interest rate for future annuitants

May 3, 2004, Elgin, Ill.

With eyes firmly fixed on the future, the Brethren Benefit Trust Board of Directors has affirmed its blueprint for operations over the next five years.

Meeting April 17-18 at the Church of the Brethren General Offices in Elgin, Ill., the Board approved a strategic plan that includes initiatives pertaining to the Brethren Pension Plan, Brethren Medical Plan, Church of the Brethren Credit Union, and Brethren Foundation, as well as overall marketing efforts.

“After 18 months of study, research, and discussion that led to the creation of this Plan, we believe these strategic issues will guide a majority of BBT’s work for the years to come,” said BBT President Wil Nolen. “We’re excited about what the future holds for BBT.”

The strategic plan item focusing on the Pension Plan calls for the Board’s Investment Committee and staff to improve the method of funding retirement benefits to reduce the possibility of future unfunded liabilities. The Board began addressing this issue one year ago when it approved the creation of “A” accounts for contributions before July 1, 2003, and “B” accounts for contributions on or after that date. When annuitized, the two accounts may have different assumed rates of return upon which annuity payments are based. Currently the rates are eight percent for the “A” accounts and six percent for “B” accounts. Only the “B” account rate is expected to be reviewed annually.

The major strategic initiative for the Brethren Medical Plan is a continuing effort to locate and implement reasonable coverage for members at affordable premiums. Inflationary trends and unfavorable claims experience are two big reasons for the major challenge in providing a good benefit plan at a reasonable cost.

On April 1 BBT fulfilled a strategic plan item of sponsoring the denominational credit union by assuming all administrative functions of the Church of the Brethren Credit Union, which until mid-February was the Brethren Employees’ Credit Union. Staff members reported to the Board that they have begun a review of operating policies and procedures and are exploring the development of new products and services.

In addition to its operational relationship with the Credit Union, BBT’s Board affirmed the creation of a Credit Union Service Organization (CUSO) as another strategic priority. A CUSO typically offers an expanded range of financial services to members of a Credit Union, although it is a separate organization.

Under the umbrella of Brethren Foundation, the Board included a strategic priority to support church agencies and related organizations in the development of their own deferred giving programs. This will support primarily those agencies with insufficient staff to implement such a program on their own. Brethren Foundation will prepare educational articles, provide descriptive materials, consult as needed with potential donors, and administer any gifts that come to client organizations.

The final component of the strategic plan contemplates the development of a consistent marketing identity. The wide range of ministries provided by BBT calls for a broad promotions strategy.

Board maintains 6% assumption rate on “B” Pension accounts

Upon retirement, a member of the Pension Plan may elect to annuitize all or part of his or her accumulation within the Plan. At that time, the Pension Plan calculates a monthly payment based on an assumed rate of return.

As part of its plan to ensure the long-term solvency of the program, the Board in April 2003 elected to offer two rates ─ an eight percent rate for accumulations prior to July 1, 2003, and a rate on subsequent accumulations that can be changed each year by the Board. Initially, this rate was set at six percent for annuities initiated between July 1, 2003 and June 30, 2004. At its most recent meeting, the Board continued the six percent rate for the twelve months beginning July 1, 2004. In setting the assumption rate, the Board balances retirees’ need for income with the fund’s long-term obligation of earning returns at least equal to the assumption rate.

The decision was based on a careful analysis of the asset allocation strategy used within the Retirement Benefits Fund, on earnings expectations for the financial markets, and through comparison with rates offered by members of the Church Benefits Association. The BBT Investment Committee weighed these factors during its April 16 meeting and recommended retaining the six percent return assumption for the next year.

BBT reviews accomplishments in Socially Responsible Investing

Each BBT investment fund manager follows Socially Responsible Investing (SRI) guidelines that encourage the manager to invest in companies whose activities “support the creation and maintenance of a society consistent with the policy statements of the Church of the Brethren Annual Conference.” The guidelines also exclude all stock or bond investments in organizations that generate significant revenue from gambling, alcohol, tobacco, or defense contracts. Over the preceding 10 years, BBT funds generated returns on par with those of major market benchmarks. “This means that our investors gave up nothing to the markets in order to invest in a socially responsible manner,” said Will Thomas, BBT’s SRI director.

The second of three components in the SRI ministry, the Community Development Investment Fund, has been available to Pension members and Foundation clients for one year. These investments are placed with nonprofit lenders and are used to finance affordable homes and small businesses and to help fund agencies working directly with disadvantaged populations and communities.

The Board reviewed an educational pamphlet titled “A Christian Call to Faith-Based Investing.” Its purpose is to spark discussion on the reasons for reflecting an investor’s principles in investment decisions. Developed by members of the Interfaith Center on Corporate Responsibility, the brochure outlines why faith-based investing is consistent with Christian theology.

Most of BBT’s SRI activity, however, focuses on shareholder actions. BBT was lead filer in 2004 of three shareholder initiatives: YUM! Brands was asked to adopt a smoke-free policy in each of its company-owned restaurants; Caterpillar was asked to report on the impact HIV/AIDS will have on its African operations and on the company’s response to the pandemic; and Xcel Energy was asked to report on its efforts to reduce emissions of greenhouse gases.

In addition to these direct efforts, Boston Common Asset Management, a BBT investment manager, actively pursues several others using BBT shares to gain access. The following table summarizes these issues --

Other Business

• Moderator Chris Bowman opened the Board meeting with a meditation and prayer. This was the last in his series of visits to Board meetings of the five church agencies. Board members expressed appreciation for Bowman’s presence.

• Dennis Kingery, Director of Credit Union Operations for the Church of the Brethren Credit Union (CoBCU), reported on BBT’s April 1 startup as CoBCU administrator. Kingery supervised the relocation of the Credit Union’s offices to BBT’s area within the Church of the Brethren General Offices and the launching of a new "look," complete with new logo, brochure, forms, and Web site.

• BBT’s long-term care insurance has been the topic of several employee educational seminars. Following numerous inquiries for specific information, about 20 individuals have policies either in force or under way.

• The Board received reports on preparations for 2004 Annual Conference, the work of the InterAgency Forum, issues before the denomination’s national agency executives, the content of the Ecclesiology Consultation, and matters that have come before the Church Benefits Association.

• Future BBT Board meetings are scheduled for July 6 in Charleston, W.Va.; and November 19-20 in Northern Indiana District.