November 11, 2011
ELCA Board of Pensions trustees announce 2012 annuity adjustment
After its Nov. 4-6 meeting in Minneapolis, the ELCA Board of Pensions trustees announced a 3.8 percent reduction in 2012 payments to ELCA Participating Annuity members and a 2.1 percent interest crediting rate for bridge account holders in 2012.
The ELCA Participating Annuity is an immediate variable annuity that provides an income stream for life and income growth potential over the long term.
The 3.8 percent reduction reflects a guideline adopted earlier this year that takes into consideration the funded ratio (a comparison of net assets to future benefit obligations) of the ELCA Participating Annuity Investment Fund. Under the guideline, a funded ratio below 1.000 calls for annuity payments to be reduced. As of Sept. 30, the fund's assets were estimated to cover 88.5 cents of every dollar in future benefit obligations.
"We hold in tension the needs and desires of our annuitants for annuity payments now with the expectation that payments will be made for life," said Board of Pensions CEO and President Jeffrey Thiemann. "We have a great group of trustees and advisers that discharge this responsibility with great care."
Brad Joern, the board's director of products and services, said the 2012 adjustment reflected the fund's market performance. "To moderate the magnitude of annual adjustments, we follow a process that adjusted 2012 annuity payments by one-third of the difference between the 0.885 funded ratio and 1.000," he said.
Where a three-year recovery was originally announced in 2009, the new guideline now intends for adjustments to be more responsive to market performance, Joern said. The 2012 adjustment is smaller than the three years of 9 percent reductions previously announced, he said, adding that reductions are now likely to occur over a longer period of time.
In other news, the trustees approved a $49.4 million operating budget for 2012, up from a 2011 operating budget of $46.7 million.