The Brethren Benefit Trust Board of Trustees
shifts staff and assets to limit liability

May 18, 2000 Elgin, Il

A major shift is about to occur within Brethren Benefit Trust, a shift that includes the transfer of employees and millions of dollars of assets, yet this shift is likely to go unnoticed.

BBT, an unincorporated entity established by the Church of the Brethren Annual Conference, includes two major incorporated entities — Brethren Benefit Trust Inc., and the Brethren Foundation Inc. Currently, all employees, administrative operations, the life insurance program, and several benevolence funds reside within the unincorporated BBT domain. Without incorporation and separation, there is no statutory legal protection for BBT, the Annual Conference, and affiliated congregations in the unlikely scenario that legal action is taken against BBT and a settlement is assessed that exceeds BBT’s liability insurance.

Although BBT’s attorneys stated the chance of this happening is slim, they advised the BBT Board on April 29 during its spring meetings to err on the side of caution. As a result, the Board voted to transfer all employees, programs, and assets currently lodged under BBT to BBT Inc. or the Brethren Foundation Inc., both of which were incorporated around 1990 to limit liability related to BBT’s pension, insurance, and financial services ministries.

“We will still have the BBT, which retains the responsibility for reporting the activities of its incorporated entities to the Annual Conference,” said Wil Nolen, BBT president. “These transfers will not affect BBT’s customer service in any way. Because of the nature of these shifts, no one aside from our legal and finance staffs will notice a change.”

A side benefit to this transition is that BBT’s finance office will now have two, not three, general ledgers to maintain.

Limiting liability. Bill Walsh (second from left), a BBT legal counsel, explains why it is advantageous to transfer everything of BBT’s not protected by incorporation to an incorporated entity. Seated around Walsh are Will Thomas, controller (left); Ann Quay, board chair; and Wil Nolen, president.

Group Life Insurance

Due to escalating costs, members who participate in the Group Life Insurance Plan may soon have a new carrier.

Aetna U.S. Healthcare recently indicated that although a 50 percent rate increase in life insurance premiums would be warranted, it is only seeking a 25 percent increase, according to Jeff Garber, director of insurance plans. However, the cost of including a waiver of premium for people on disability — an option BBT asked Aetna to include — will push the quoted rate up an additional 12 percent for a total proposed increase of 37 percent.

Believing that 37 percent is an unreasonably high one-year increase, BBT has sent a request for proposal to a dozen other insurance carriers with the intent of exploring other options.

FlexCare

Due to escalating costs, members who participate in the Group Life Insurance Plan may soon have a new carrier.

As of January 2000, three employment groups that receive insurance through Brethren Insurance Plans — Association of Brethren Caregivers, Brethren ministers, and Brethren Benefit Trust — are utilizing the new FlexCare cafeteria plan. This option allows money to be deducted from employees’ wages before taxes, and set aside to pay medical, dental, and vision premiums as well as other medical expenses. The plan also includes a dependent care option for expenses such as childcare. The result is that participating employees’ federal and state income tax bills are lowered because less taxable income appears on their W-2 statements.

Total FlexCare participation as of May 1 was 781 people; of these, 141 are also enrolled in the dental plan, 200 utilize the vision plan, 129 have medical reimbursement accounts, and 8 have the dependent care option.

“These are great money savings benefits to our plan members,” Jeff Garber said. “We’re certain they will grow in popularity and usage in the future.”

Closing the books. Greg Geisert, BBT Board member and Audit Committee chair from Harrisonburg, Va., explains that BBT’s books received a clean audit for 1999. Looking on are Judy Mills Reimer, ex officio Board member as executive director of the General Board, and Laura Nedli, Finance staff consultant.

Retiring before 59 1/2?

Brethren Pension Plan members who retire before the age of 59 1/2 but who continue working could be impacted by returning to work too soon. Those who choose to annuitize the employer portion of their account while withdrawing the employee portion (and subsequently paying the income tax due on that amount) will have a six-month waiting period before they are eligible to resume contributing into a new Pension Plan account.

This policy, approved by the BBT Board, was proposed because the IRS has no clear policy on separation/resumption of service. “This guideline needed to be established so that the IRS can’t turn around and assess early retirees with early withdrawal penalties,” said Don Fecher, Pension Plan director.

Clergy consultation

Begun on Jan. 1, the Clergy Consultation Service that is available to medical plan members of the Brethren Ministers Group allows telephone access to counselors who can assist with a variety of problems.

“The idea is to provide plan members and anyone in their families with help from therapists who are trained to handle the special needs of pastors,” said Jeff Garber. “The therapists can then arrange for follow-up visits with another practitioner.”

The ministry, a service of the Clergy Consultation Service of the Kairos Institute of Madison, N.J., “is off to a good start,” Garber said, who added that a related newsletter will be sent out with the next round of insurance statements in an effort to increase awareness of the ministry.

Charitable Gift Annuity registration

The Brethren Foundation is now in compliance to receive charitable gift annuities in 31 states. Registration is being considered for five to 13 additional states by Jim Replogle, the Foundation’s director of Deferred Gifts Services. This tax deductible gift mechanism is growing in popularity among Church of the Brethren members.

Charitable Gift Funds

Individuals who establish a charitable gift fund can contribute tax deductible donations to that fund annually. The fund is invested for growth potential but is not donated to a charity at that time. This option is utilized by people seeking a tax deduction for their charitable contributions but who have either not decided where to send their contributions to or who want to grow their donations so that they can make a larger contribution later in life.

A major change that allows gift funds under $50,000 to accumulate investment earnings was approved by the Board. This change will allow funds to grow with market increases. A new minimum investment of $10,000 was approved, up from the current $2,000.

Church Workers Assistance Plan

“The face of the Church Workers Assistance Plan is changing, albeit slowly,” reported Don Fecher. The Plan, formerly known as the Retired Church Workers Fund (RCWF), was established in 1990 to assist retired church workers with inadequate income.

In 1998 Annual Conference expanded the scope of the RCWF to include active ministers. It has protected the funds with a legal document, thus the name Church Workers Assistance Plan. Up to that time the number of participants consisted almost entirely of retired ministers and their surviving spouses. Currently, 40 individuals — 20 ministers and 20 surviving spouses — are receiving aid from the plan. The average monthly grant is $324.

“Since RCWF became the Church Workers Assistance Plan, we are seeing fewer retired applicants,” Fecher said. “The number of our older retired participants is declining through attrition, and the strong U.S. economy over the past decade has dramatically improved the retirement resources of our more recent retirees. Today our new applicants are active ministers who appear to have excessive debt and a lack of cash reserves.”

Fecher’s office monitors debt reduction and the use of credit counseling services in cases where credit card debt is the problem. “We try to give assistance without being a crutch,” Fecher said.

To qualify, retired ministers must have served for a minimum of 20 years and have a retirement income of less than $24,000. Active ministers must have worked for a church for at least three years and fill out an application and an explanation of need.

And the answer is.... BBT Board members Melvin Wampler, Fred Bernhard, Cheryl Ingold, Ray Donadio, and staff Jeff Garber peruse a printed exhibit during the Board’s Spring meetings.

Long term disability benefit

When a minister becomes disabled and begins receiving his or her long-term disability benefit, the employer portion of the benefit is taxable. Up until this Board meeting ministers who received a long-term disability benefit could not apply their housing allowance exclusion toward that benefit, meaning they had to pay tax on two-thirds of their disability income.

On the recommendation of Jeff Garber, the Board approved that up to 100 percent of the taxable portion of a minister’s long-term disability income shall be eligible for a housing allowance exclusion, beginning for the year 2000.

“In consultation with our legal counsel we know of at least three other denominations whose Benefit Boards allow the housing allowance exclusion to apply toward the disability benefit,” said Garber. “There is no reason why BBT should not do the same.”

Elections

Three of BBT’s 12 Board of Trustees positions will be up for election this year.

One candidate will be elected at this year’s Annual Conference, July 15-19, in Kansas City. Candidates nominated to represent the Annual Conference are Richard Brandhorst of Waterloo, Iowa; Wayne T. Scott of Harrisburg, Pa.; S. Philip Stover of Quinter, Kan.; and Cynthia Wareham of Martinsburg, Pa.

The other two positions will be elected by BBT’s Pension Plan members, representing two groups.

Candidates nominated to represent churches and districts are Herbert Fisher (incumbent) of Mountain Grove, Mo., and Ken Holderread of Elgin, Ill.

Candidates nominated to represent the retirement home communities are David Gerber of Hanover, Pa., and Vernon Showalter of Oregon, Ill.

Other business

Brethren Foundation
• Has reached 150 clients with $100 million in assets.
• Has given a new PowerPoint presentation, detailing various deferred gift instruments, six times in 2000.

Brethren Pension Plan
• Has 4,079 total members enrolled; 1,030 are retired. The average age of new retirees is 63.83, down from 64.24 a year ago. This decline is attributed in part to the increase in Pension Plan accounts over the past decade that have resulted from the strong economy.
• Added a half-time staff member, Peggy Bruell, who also serves half-time for the Brethren Medical Plan.
• Have developed an automated annuity projection program that allows benefit projections to be calculated immediately.

eMountain Communications
• Affirmed the myriad Web and e-mail services now provided by BBT’s electronic ministries subsidiary.
• Approved a rate structure for the various services.

Employee Financial Services
• Reported that eight Employee Financial Seminars were held or scheduled from January through May.
Finance
• Reported that the 1999 year-end financial statements were approved by an independent audit firm; BBT’s audited financial statement will be included in the Kansas City Annual Conference delegate packet and will be available at the BBT booth.
• Held a five-year review for Hotchkiss Associates as an equity investment manager, specializing in growth companies, and approved renewal of its contract.
• Held a five-year review for Bank of America as a short-term investment manager and approved renewal of its contract.

Insurance Plans
• Approved two waiver of premium resolutions for disabled members of the Ministers’ group. The waived fees, for medical insurance and long-term disability, will be paid for from the respective plan’s reserves.

General
• Discussed three year priorities developed this year by BBT’s management team — Darryl Deardorff, Don Fecher, Jeff Garber, Marilyn Nelson, and Wil Nolen.
• Honored employees Veronica Aragon, Lori Domich, and Donna March for 10 years of service.
• Presented citations to former staff Sandy Pryde and Kathy Lee (in absentia).