The document discusses proposed changes to the West Michigan Conference (WMC) Post-Retirement Medical Benefit Programs. The changes aim to maintain retiree medical and prescription drug coverage while ensuring long-term financial sustainability. Key changes include eliminating premium funding for retiree dental and vision coverage, limiting medical coverage for working spouses with alternate options, increasing retiree premium cost sharing, and revising the supplemental medical benefit design. The changes seek to reduce costs and liabilities while continuing to provide core medical coverage to retirees.

1. Presented by the
Conference Board of Pension & Health Benefits
1

2. April 2012
2

3. The primary objective of the Changes to the
Post-retirement Medical Benefit Programs is
to maintain the retiree medical and
prescription drug benefit coverages and to
preserve the long-term financial stability and
viability of these programs.
3

4. The WMC Board of Pension & Health (the Board)
believes that the Conference and Churches
have a moral and ethical obligation
 to honor the prior commitments which were
made to maintain the post-retirement
medical coverage for the current retired
clergy and their covered spouses; and,
 to provide the post-retirement medical
coverage to future retirees and their eligible
spouses.
4

5. There are two components of the WMC Post-
retirement Medical Benefit Program
1) Early Retirement Benefit Coverage
-This component provides retiree medical
and prescription drug benefit coverage
prior to age 65
2) Normal Retirement Benefit Coverage
-This component provides retiree medical
and prescription drug benefit coverage
after age 65
5

6.  The medical & prescription drug benefit
coverages during early retirement are
provided under the Self-funded Medical Plan
for active participants.
 The medical and prescription drug benefit
coverages provided during early retirement
are identical to the benefits provided to active
participants of the Self-funded Medical Plan.
6

7. The financial accounting and funding of the
long-term cost liability for the post-
retirement medical coverage during early
retirement period must be considered and
treated as a separate post-retirement benefit
program.
7

8.  The medical and prescription drug benefit
coverages during normal retirement are provided
under 2 separate post-retirement benefit
programs.
 A separate Supplemental Medical Program is
maintained by the Conference to provide
complementary medical benefit coverage to
retired participants and their covered spouses for
the medical costs which are not covered by
Medicare Parts A & B benefit coverage.
8

9. In addition, a separate Prescription Drug
Insurance Program is also sponsored by the
Conference to provide comprehensive
prescription drug benefits for the retired
participants and their spouses.
The Prescription Drug Benefit Program provides
comprehensive drug benefit coverage without
any catastrophic coverage gap.
9

10. 1. To complement the WMC Retirement Income
Plan and provide a comprehensive WMC
Retirement Benefit Program with a balance
between the Pension Income Plan and the
Post-retirement Health Care Coverage.
2. To honor & fulfill the Church’s prior
commitment to maintain the Post-
retirement Medical Benefit Coverage to
existing retirees and their spouses.
10

11. 3. To honor & fulfill the Church’s prior
commitment to provide Post-retirement
Medical Benefit Coverage to long service
clergy.
4. To recognize and compensate long-term
clergy for their contributions during a
lengthy career in the ministry & past service
to their congregations.
5. To provide post-retirement medical
coverage because it is the “right thing to do
for clergy” by the Churches.
11

12. 6. To encourage and promote normal
retirement of clergy and Conference staff at
the established normal retirement age (i.e.
age 65).
7. To allow early retirement of clergy and
Conference staff prior to attainment of the
age 65.
8. To provide financial protection and security
to retired clergy and their eligible spouses
from the potential of major medical expenses
resulting from catastrophic illness or injury
during retirement.
12

13. 1. To retain comprehensive retiree medical and drug
benefit coverages for the existing retired participants
and their covered spouses during both early and
normal retirement.
2. To provide comprehensive retiree medical and drug
benefit coverages for future qualified retirees and
their eligible spouses during retirement.
3. To revise the retiree medical benefit programs for
early and normal retirement so that these coverages
are financially affordable and sustainable on a long-
term basis by the churches and Conference.
13

14. 4. To achieve the necessary cost reductions for
retiree medical coverages through a balanced
multidimensional approach to the future design
and delivery of these benefits.
5. To focus the future design and structure of the
retiree coverage towards maintaining
comprehensive core medical and prescription
drug benefit coverages.
6. To provide comprehensive medical and drug
benefit coverage which offers financial protection
in event of catastrophic medical conditions
during retirement.
14

15. 7. To provide a reasonable balance in the premium funding
or cost sharing levels between the Churches/ Conference
and the retired participants and their covered spouses.
8. To provide premium funding subsidy levels by the
churches for retiree medical benefits to the eligible
spouses of retired participants which are equal to the
premium funding levels provided to retired participants.
9. To recognize and include the future costs of providing the
post-retirement medical benefit coverage as a significant
benefit component of the total compensation delivered to
eligible clergy & Conference staff similar to other
employee benefit programs.
15

16. Beginning in 2013, the Retiree Medical Benefit
Coverage will be-
 Considered to be a key element of the WMC
Retirement Benefit Program; and,
 the cost of providing this benefit coverage
will be included as a major benefit
component under the total compensation
delivery system to the clergy.
16

17. Total Accrued Past Service Cost
Liability for Eligible Participants
(Current Clergy & Conference Staff $31,497,000
and Retired Participants as of
January 2012)
Reserve Funding for the Retiree
$9,400,000
Health Benefits in December 2012
Expected Unfunded Past Service
Cost Liability to be Accrued at $24,327,000
December 31, 2012*
These cost liabilities are determined by an independent actuary.
*includes projected 2012 service accrual and 2012 interest charge
17

18. The 2012 annual funding cost to pay the premium
costs for the current Retiree Health Benefit
Coverages and amortize the accrued long-term
cost liability exceeds $2.4 million per year for a
30 year amortization period.
The $2.4 million annual funding expense level
translates to an average annual funding charge of
$8,000 per church per year to maintain the
current post-retirement health benefit programs
assuming 300 viable congregations.
18

19. The average 2012 unfunded cost liability under
the current post-retirement health care
coverage would be over $80,000 per church
assuming 300 viable congregations.
19

20. 1. The Cost of the current Retiree Health
Coverage is not financially affordable and
sustainable by the Churches & Conference.
2. Significant Changes must be made to the
current Retiree Health Coverages to
maintain the long-term financial viability &
sustainability of these Programs.
20

21. The Conference currently pay 85% of the full
premium costs for the post-retirement
medical and prescription drug coverages for
both the retired participants and their eligible
spouses on behalf of the churches.
The premium/ funding costs for the post-
retirement benefit coverages are paid by the
Conference from the reserve funding for
these programs.
21

22. The retired participants currently pay about
15% of the premium costs for their post-
retirement benefit coverage during both the
early and normal retirement coverage
periods.
The 15% premium cost sharing level paid by
the retired participants and their covered
spouses is substantially lower than the
prevailing participant premium contribution
levels paid in the secular environment.
22

23.  For Retiree Coverage- the Participant Premium
Cost Sharing is generally within the 25% to 35%
range.
 For Retired Spousal Coverage- the Dependent
Premium Cost Sharing is generally within the 35%
to 50% range, if provided.
 Some Employer sponsored Plans do not offer or
provide premium funding for post-retirement
spousal coverage.
Many Employers in the private sector have
terminated their Post-retirement Medical Benefit
Programs due to financial liabilities & funding
issues.
23

24. By the payment of 85% of the premium costs
for the retiree medical programs, the
Conference has insulated both the churches
and the retired participants from the real
costs of maintaining the retiree medical
benefit programs.
24

25. The total net premium expense to be paid by
the Conference for maintaining the retiree
medical drug benefits for early and normal
retirement is projected at $1.15 million for
2012.
This net annual premium expense translates to
an average funding charge of in excess of
$3,800 per church simply to cover the 2012
cash expenditure for the premium cost of the
current retiree group.
25

26. The Conference has paid the annual premium
costs from the reserve funding for health care
benefits which was established by the
recovery of the excess pension funding under
the Pre-1982 Retirement Income Plans.
The Board made a decision in 2011 to dedicate
approximately $10.75 million of the health
care reserve funding towards the long-term
cost liability of the retiree medical benefit
programs.
26

27. The Reserve Funds will be held exclusively for
the purpose of providing future benefits and
funding for the long-term cost liability of the
post-retirement medical benefit programs.
However, future premium cost projections
indicate that this Reserve Funding will be
exhausted in approximately 10 years if major
changes are not made to the modified post-
retirement programs.
27

28. The Reserve Funding level for the WMC Post-
retirement Health Benefit Coverages is
projected to be $9.4 million in December
2012.
The positive news regarding the funding status
is that the current Reserve Funding provides a
solid funding foundation towards achieving
long-term financial sustainability of a more
limited retiree medical benefit program.
28

29. Current Reserve Funding is sufficient to cover
the expected funding costs of the modified
retiree health coverages for next 10 to 12
years.
The Reserve Fund provides a strong funding
foundation towards achieving the long-term
financial viability and sustainability for a more
limited retiree medical benefit program.
29

30. However, proactive action must be taken in
2013 to implement the approved revisions to
the current Retiree Medical Coverage to-
 preserve the existing Reserve Funding level;
 maintain the financial leveraging provided by
the present reserve funding levels for future
funding purposes; and,
 protect the future financial integrity &
viability of these programs.
30

31. The urgency for addressing the funding issues
and changing the Retiree Medical Benefit
Programs has increased for the following
reasons.
Continual escalation in health care costs and
the progressive increases in the premium
expense over past years have increased the
annual costs for maintaining the current
retiree programs to the $1.2-1.3 million
range.
31

32. New financial/ accounting standards require
that long-term cost liabilities for the retiree
medical programs must be recognized and
reported within the Conference’s financial
statements.
32

33.  The number of retirees and spouses covered
under these programs has progressively
increased over the past several years due to
the demographics of the clergy group.
 The long-term unfunded cost liability for the
current retiree coverages has increased
significantly due to the higher number of
participants and the extended coverage
periods resulting from longer life expectancy
of the retired group.
33

34. A decline in the investment earnings on the
reserve assets has occurred over the past few
years due to economic conditions and the
lower interest rate environment.
 During prior years, the investment earnings
on the reserve funds was sufficient to cover
most of the premium expense for the retiree
medical programs.
 At the current investment earnings levels,
premium payments during recent years are
drawing down the principal of the reserve
assets at a rapid rate.
34

35. By taking proactive steps to address these
issues now, we can maintain the post-
retirement coverages indefinitely.
The design changes achieve the defined
objectives and support the long-term
financial viability and sustainability of the
retiree medical benefit coverages.
35

36. 1. The Conference Premium Funding for Retiree
Dental & Vision Care Benefit Coverages for all
retired participants and their eligible spouses
will be eliminated for both early and normal
retirement beginning in 2013.
◦ The elimination of the premium funding by
the churches for retiree dental & vision
benefit coverages applies for both current
and future retirees.
36

37. 2. Continuation of Post-retirement Medical
Benefit Coverage will not be provided to
Working Spouses of WMC Retired Participants
who qualify for post-retirement medical
benefit coverage through an alternate group
retiree medical benefit plan beginning in
2013.
◦ This coverage exclusion will apply for both early
and normal retirements.
37

38. 3. The future Premium Funding or Cost Sharing
to be paid by the Churches and Conference
for retiree medical coverage during the Early
Retirement Period will be limited to coverage
between the age levels of 60 to 65 beginning
in 2013.
◦ This provision only applies for future early
retirement cases.
◦ The eligibility criteria to qualify for premium
funding by the Conference will also be modified in
2013.
38

39. 4. The future Premium Cost Sharing Levels to
be paid by Retired Participants and their
covered spouses for the revised medical
coverage during both early and normal
retirement will be increased in 2013.
◦ The adjustments to the future participant and
dependent premium cost sharing levels will
apply to both current and future retirees.
39

40. 5. A Variable Age Related Participant Premium
Cost Sharing Schedule will be implemented
for the Early Retirement coverage to balance
the premium funding costs to be paid by the
Conference for retired participants and their
spouses during early retirement.
◦ This change will only apply to future early
retirement situations.
◦ The Variable Participant Cost Sharing Schedule is
based on the participant’s age level at retirement.
40

41. 6. A Fixed Annual Limitation on the Maximum
Premium Funding or Cost Sharing Level to be
paid by the Churches for the future medical &
drug coverage provided during normal
retirement will be included in 2013.
◦ This change will apply prospectively to all current &
future retired participants and their spouses during
normal retirement only.
◦ This change will not have any immediate impact on
the retiree medical benefits or the premium cost
sharing by the Conference over the next few years.
41

42. 7. The Supplemental Medical Benefit Coverage
was revised to a modified comprehensive
benefit design with coinsurance features
effective in January, 2012.
◦ The design change in the Supplemental Medical
Benefit Coverage applies to all current and future
retirees and their eligible spouses during normal
retirement only.
42

43.  The premium funding paid by the Conference
for the Retiree Dental & Vision Benefit
Coverages will be discontinued for early and
normal retirements beginning in 2013.
 The Conference cannot afford to maintain the
premium funding subsidy for these benefit
coverages during retirement.
43

44.  The future focus of the post-retirement
benefit program will be directed towards
maintaining core medical and prescription
drug benefit coverages during early and
normal retirement.
 Very few employers provide any material
premium funding for continuation of dental
and vision benefit coverages during the post-
retirement period.
44

45.  Significant ongoing future cost savings and
reduction in the unfunded cost liability will be
realized by the Churches/ Conference through
the elimination of the premium cost sharing for
the retiree dental and vision benefit coverages.
 The annual premium savings to be achieved by
the Conference for the discontinuing the funding
for these retiree coverages exceeds $150,000 or
an average of over $500 annually per Church.
45

46. The Retiree Dental Benefit Program will be
retained as an optional or voluntary benefit
coverage on a self-payment basis by
participants.
Retired participants & their eligible spouses will
pay the full (100%) premium cost for
continuing coverage under the voluntary
retiree dental benefit program beginning in
2013.
46

47. The WMC Retiree Medical Benefit has been
elected by many Working Spouses of retired
clergy who also have access to alternate
post-retirement medical benefit coverage.
Providing retiree medical coverage to the
spouses of retired participants has a very
significant long-term cost obligation to the
churches & Conference.
47

48. When a Working Spouse with access to
alternate group retiree medical coverage
elects to continue under the WMC Retiree
Medical Coverage, this results in a transfer of
future cost liability & cost shifting of
conservatively $70,000 to $100,000 per
person to the Conference over a normal life
expectancy period.
48

49. The exclusion provision for Working Spouse
with access to alternate group retiree medical
coverage is designed to-
◦ help control the long-term costs of providing
spousal coverage under the WMC Post-retirement
Coverages; and
◦ balance the future costs of providing retiree
coverage to the eligible spouses of retired
participants with other employers or group
programs.
49

50. This exclusion provision will apply to
circumstances where a Working Spouse is
also eligible for another group post-
retirement medical benefit plan maintained
by his/her employer or another comparable
plan sponsor (e.g. union sponsored programs
or multiemployer sponsored programs).
50

51. Working Spouses with alternate group retiree
medical coverage will not be permitted to
continue medical and drug benefit coverage
under the WMC Retiree Medical Benefit
Programs during either early or normal
retirement and must take the retiree medical
benefit coverage offered through the
alternate group program.
51

52. The exclusion for Working Spouses will apply
regardless of any variances in the participant
premium cost sharing levels and/or the
benefit coverage features between the WMC
post-retirement medical benefit coverage and
the Working Spouse’s alternate post-
retirement medical benefit program.
◦ There will not be any comparability provision
incorporated under WMC retiree coverage
exclusion.
52

53. The only exceptions to the Working Spouse
Exclusion Provisions are that-
◦ the alternate retiree coverage must include both
medical & prescription drug benefit coverages;
and/or,
◦ the employer or sponsor of the alternate retiree
program must provide a premium funding subsidy
level equivalent to 35% or more of the full premium
cost.
53

54. The consolidated cost savings under the WMC
Retiree Medical Program for the exclusion of
20 working spouses from the post-retirement
medical coverage will result in total future
premium savings (as well as reduction in the
unfunded medical cost liability) of at least
$1.3 to $1.5 million in future years.
54

55. The minimum age and service requirements to
qualify for any premium funding payments by
the Conference during early retirement will be
increased to age 60 with a minimum of at
least 25 years of credited service with the
Conference.
◦ Participants must have 25 or more years of service
to qualify for premium cost sharing by the
Conference during early retirement beginning at
age 60.
55

56. This means that the maximum potential
coverage period for post-retirement medical
coverage during early retirement will be
reduced
◦ from the current 10 year coverage period between
ages 55 to 65
◦ to a maximum five (5) year early retirement
coverage period from age 60 to age 65 beginning in
2013
56

57. The Conference will only provide the premium
funding for medical coverage of qualified
participants and their eligible spouses during
early retirement between the age levels of 60
and 65.
◦ No premium funding subsidy will be paid by the
Churches/ Conference for any early retirement prior
to age 60, regardless of the participant’s length of
service with the Conference.
57

58. The minimum age limit to qualify for any
continuation of WMC Retiree medical
coverage will be increased from age 55 to age
58.
◦ Participants who elect early retirement between the
age levels of 58 to 60 can maintain the post-
retirement medical coverage by self-payment of the
full premium expense between these age levels.
58

59. The minimum service requirement to qualify
for any premium cost sharing payment by the
Conference for retiree medical coverage
during early retirement will vary between age
levels of 60 and 63.
Credited service for eligibility determination
purposes means prior service within the
Michigan Area which is recognized and
credited under the applicable WMC
Retirement Income Plan.
59

60. Service Eligibility Requirements to qualify for
any premium funding by the churches are as
follows-
 The minimum service level for early
retirement at ages 60 and 61 will be 25 years
of credited service.
 The minimum service level for early
retirement at age 62 will be 20 years of
credited service.
 The minimum service level for early
retirement at ages 63 & 64 will be 15 years of
credited service.
60

61. Retired participants and their covered spouses only
pay 15% of the total premium expense for their
2012 post-retirement health benefits during
both early and normal retirement.
The current premium cost sharing levels paid by
retired participants and their spouses are well
below the prevailing external market levels for
comprehensive post-retirement benefit
coverages and cannot be sustained in the future.
61

62. The future premium cost sharing levels to be
paid by retired participants and their covered
spouses during both early and normal
retirement must be significantly increased to
make these programs financially viable and
sustainable on a long-term basis.
62

63. The targeted premium cost sharing percentage
level to be paid by retired participants and
their covered spouses for the supplemental
medical and prescription drug benefit
coverages during normal retirement is set at
30% of the future annual premium expense
for a full career participant with 30 or more
years of credited service beginning in 2013.
63

64. For current retirees and their covered spouses,
the future participant premium cost sharing
level will be increased to 30% beginning in
2013 regardless of the retired participant’s
credited service at his or her retirement date.
64

65.  Variable Participant Premium Contribution
Schedules will be implemented in 2013 for
future retirements only.
 The Variable Schedules will provide for
varying participant and dependent premium
cost sharing levels based on their age levels
and the retired participant’s credited service
level at the retirement date.
◦ Separate Variable Schedules will apply for both early
and normal retirements.
65

66. For retiree medical coverage during normal
retirement (age 65 & over) the applicable
participant premium cost sharing percentage
level under the Variable Schedule for both the
retired participant and his/her eligible spouse
will be determined based only on the
participant’s credited service with WMC.
◦ The participant & dependent premium contribution
level during normal retirement (after age 65) is not
age related.
66

67. Based on the future premium cost sharing level
of 30% and 2012 premium rates for the
retiree medical and drug benefit coverage
during normal retirement, the current retirees
and their dependents will begin paying a
monthly premium contribution payment of
about $72.60 per person and a total annual
premium contribution payment of $871.20
per person beginning in 2013.
67

68. Future Variable Participant Premium Contribution Schedule for
Normal Retirement Only
Credited Service Level Premium Cost Sharing Levels
Age 65 with 30 or more years 30% Participant Payment
Age 65 with 25 years 40% Participant Payment
Age 65 with 20 years 50% Participant Payment
Age 65 with 15 years 60% Participant Payment
(Minimum Credited Service Level is 15 years for any Conference
premium funding)
68

69. Premium cost sharing levels to be paid by
participants for medical and drug coverage
during Early Retirement will vary based on the
participant’s age level and credited service at
his/her early retirement date beginning in 2013.
 The future premium cost sharing levels to be
paid by the retired participant’s eligible spouse
during early retirement will also be variable
based on the spouse’s age level and the
participant’s credited service at the participant’s
early retirement date.
69

70. The Variable Participant Cost Sharing Schedule
for Early Retirement will balance the future
premium funding costs to the Conference for
maintaining the medical and drug coverage
during the early retirement period for the
retired clergy and their eligible spouses.
70

71. The Variable Age & Service Based Premium
Contribution Schedule will correlate the
participant and dependent premium cost
sharing levels with targeted premium funding
levels by the Conference to maintain medical
and drug benefit coverage during early
retirement.
71

72. The targeted future premium funding levels to
be paid by the WMC for providing medical
and drug coverage during early retirement for
a retiree with 30 years of credited service at
age 62 are as follows:
◦ Annual Premium Funding Target of $5,500 to
$6,500 range for single participant coverage at
early retirement age of 62.
◦ Annual Premium Funding Target of $11,000 to
$13,000 range for two party coverage (retired
clergy & spouse) at early retirement age of 62.
72

73. This Participant Premium Cost Sharing Schedule will be applied for
medical and drug coverage during early retirement beginning in January
2013:
Premium Cost Sharing Percentages
For early retirement at age 60 WMC- 60% Participant- 40%
For early retirement at age 61 WMC- 65% Participant- 35%
For early retirement at age 62 WMC- 70% Participant- 30%
For early retirement at age 63 & 64 WMC- 75% Participant- 25%
This Variable Schedule applies to retired participants (and their
eligible spouses) with 30 or more years of credited service at their
early retirement date.
73

74. Multiple service based Participant Premium
Cost Sharing Tiers will apply for each of the
early retirement age levels (i.e. between ages
60 & 64) to determine the specific premium
cost sharing percentage level to be paid
based on the retired participant’s length of
service and age level at his/her early
retirement date.
◦ Refer to copy of Variable Early Retirement Schedule
74

75. The future premium cost sharing levels to be
paid for the medical and drug benefits during
the early retirement coverage period for the
retired participant’s eligible dependents who
are below age 60 at the early retirement date
will be determined based on the participant’s
credited service level under the applicable
premium cost sharing schedule for age 60.
75

76. The 2012 premium expense for retiree medical
and drug benefit coverage under the Self-
funded Medical Plan during early retirement is
$643 per month or $7,716 annually per
participant versus the current premium
expense of $242.00 per month or $2,904
annually for retiree coverage during early
retirement.
76

77. For Early Retirement at Participant will pay
Age 60- $257.20 per month for
40% premium cost single coverage
sharing with 30 years
of credited service
For Early Retirement at Participant will pay
Age 61-
35% premium cost $225.05 per month for
sharing with 30 years single coverage
of credited service
(These premium payment illustrations are based on the 2012
premium rates for the self-funded medical plan. The future premium
cost sharing payments will be somewhat higher than the illustrated
levels.)
77

78. For Early Retirement at Participant will pay
Age 62- $192.90 per month for
30% premium cost single coverage
sharing with 30 years
of credited service
For Early Retirement at
Ages 63 & 64- Participant will pay
25% premium cost $160.75 per month for
sharing with 30 years single coverage
of credited service
78

79. The premium cost sharing levels for retired
participants and their spouses who are
currently maintaining coverage under the
early retirement provisions will be increased
to 25% of the 2013 premium cost in January
2013.
79

80. Premium cost sharing payment levels
established for the retired participants and
their eligible spouses as of the early
retirement date will remain unchanged during
the entire early retirement coverage period.
Participant & dependent premium contribution
percentage payment levels will be reset at age
65 for the medical and drug benefit coverage
during normal retirement based on the
participant’s credited service at his/her early
retirement date.
80

81. A Fixed Maximum Annual Limitation on the
future premium funding level to be paid by
the Conference for every participant and
spouse covered by the WMC medical and drug
benefit coverages during normal retirement
will be implemented in 2013.
81

82. The Maximum Premium Funding Limit by the
Conference will be $300 per retired
participant and covered spouse per month or
$3,600 per covered person each year.
◦ The Conference’s Maximum Premium Funding Limit
for a retired clergy and covered spouse will be $600
per month or $7,200 annually for medical and drug
coverage after age 65.
82

83. The Maximum Funding Limit will apply to the
future premium funding to be paid for the
medical and prescription drug benefit
coverages of every retired participant and
dependent covered under the post-retirement
program during normal retirement.
◦ This change will apply to current & future retired
participants and their covered spouses during
normal retirement only.
83

84. The Maximum Premium Funding Limit will be
established to reduce the future cost liability
and funding obligations for the post-
retirement medical and prescription drug
benefit coverage during normal retirement.
◦ This change is necessary to control the long-term
cost obligation of the medical and drug coverages
during normal retirement.
84

85. Maximum Annual Limit on the Premium
Funding to be paid by the Conference will
eventually convert the post-retirement
benefit coverages during normal retirement
to a Defined Contribution Funding approach.
(i.e. a fixed annual funding obligation for the
churches)
◦ The premium cost sharing level for the churches/
Conference will be permanently limited to the
specified maximum annual premium funding level.
85

86. The Maximum Premium Funding Limit will
eventually override and supersede the
designated premium cost sharing
components for the retired participants and
Conference discussed earlier.
◦ In future years, this approach will eventually result
in annual changes to the premium payment
components between participants and the
Conference every year after the maximum annual
premium funding limit is attained based on the
future medical premium expense levels.
86

87.  During the transitional period before the
maximum annual premium funding limit is
attained, the designated Participant and
Conference premium cost sharing percentage
levels will continue to apply.
 After the maximum annual premium funding
limit for the Conference is reached in the future,
the retired participants and their spouses will be
responsible for payment of the remaining future
premium expense which exceeds the maximum
annual funding level provided by the Conference.
87

88. Based on a 7.0% assumption for future medical
inflation trend, the Maximum Annual Funding
Limit of $3,600.00 per year will be attained in
9 years measured from 2012 (i.e. in 2021) for
a retired clergy with a full career of 30 or
more years of credited service.
88

89. The intent of the Maximum Premium Funding
Limit is to establish a permanent affordable
cost liability level for the Churches &
Conference for retiree medical benefit
coverage provided during normal retirement
89

90. The $3,600 Maximum Annual Funding Limit
will restrict the future funding liability of the
Conference for the medical and drug benefit
coverages during normal retirement to a
projected cost of $72,000 per person (based
on a standard 20 year life expectancy period).
90

91. However, the Conference’s Maximum Annual
Premium Funding Limit of $3,600 may be
reviewed periodically in future years to
determine whether future increases should be
made to the fixed limit based on future
medical inflation trends & the Church’s ability
to fund any future changes.
◦ Any review and reconsideration of this maximum
limit will be completed at 3 to 5 year intervals- not
annually.
91

92.  The Supplemental Medical Benefit Coverage
provided during normal retirement was
revised to a modified comprehensive medical
benefit design effective in January 2012.
 The modified comprehensive benefit
structure will incorporate annual out-of-
pocket coinsurance payments for any eligible
medical expenses which exceed the Medicare
Part B benefit payments.
92

93. The revised Supplemental Coverage includes:
 Coinsurance Payment Percentage Levels of 80%
by the Plan and 20% by the Participants and
covered dependents for Medicare Part B services
covered by this Plan; and,
 Maximum Annual Out-of-Pocket Expense Limit
of $1,000 per person per year. (The annual
deductible expense under Medicare Part B will be
applied towards the attainment of the $1,000
Maximum Annual Expense Limit.)
93

94. The changes to the Supplemental Medical
Coverage focus on-
◦ promoting positive consumer driven behavior to
proactively manage participant decision making for
medical care to be provided; and,
◦ controlling utilization costs for medical care
delivery rather than higher participant premium
payment levels.
(Plan utilizers pay higher costs.)
◦ Strategy is comparable to Self-funded Medical Plan
for active clergy.
94

95. The revisions to Supplemental Medical
Coverage resulted in an immediate reduction
in the 2012 premium expense level for this
Plan.
The ongoing annual premium cost savings to
be realized by the Churches/ Conference
through this revision is over $150,000 per
year or an average of approximately $500 per
church.
95

96. The change to a modified comprehensive benefit
structure has both positive and negative
implications for covered participants.
 The positive impact is that the higher future
annual premium cost sharing levels to be paid by
participants beginning in 2013 will be reduced by
$11 to $12 per month (i.e. $132 to $144
annually) because of the premium rate reduction.
 The negative impact is that the participants who
utilize the plan coverage will experience higher
out-of-pocket costs through the coinsurance
payment feature.
96

97. The current retiree prescription drug coverage
will be retained to provide comprehensive
drug benefits without any coverage gaps
during normal retirement.
No significant revisions are anticipated in 2013
to the present benefit structure of the post-
retirement prescription drug coverage during
normal retirement.
97

98. The funding strategy to be achieved by revising
the post-retirement medical benefit
programs will reduce the prior unfunded cost
liability of $24.3 million at 12/31/2012 by
$16.8 to $18.3 million under the 2013
actuarial valuation results.
The total cost reductions to be realized by
these benefit revisions will reduce the future
Unfunded Cost Liability for the Retiree
Coverages to a very manageable range of
$6.0 to $7.5 million in 2013.
98

99. This strategy will reduce the annual funding
contribution level for the churches &
Conference from over $2.4 million for 2012
to a future funding level of $776,000 in
2013.
This future Annual Funding Cost is manageable
and sustainable by the Churches &
Conference.
99

100. The 2013 Funding Cost of $776,000 will be
allocated as follows:
◦ $420,000 (or 54%) will be paid directly by the
Churches and Conference
◦ $356,000 (or 46%) will be paid from a Reserve Fund
established for the WMC Retirement Benefit
Program.
100

101. The 2013 annual funding expense of $420,000
will be charged to the churches using a
funding allocation approach which is based
on the number of full-time equivalent clergy
appointments to the churches and an
apportionment of the costs for the
Conference staff and district superintendents.
101

102. This funding allocation process results in a 2013
funding charge of $1500 (i.e. $125 per month)
for every full-time clergy, conference employee
and district superintendents.
◦ Churches with a single clergy appointment will be
charged an annual funding assessment of $1500 per
year.
◦ A Church with 2 clergy appointments will be charged an
annual funding assessment of $3,000 per year.
◦ A Church with a half-time clergy appointment will be
charged an annual funding assessment of $750 per year.
102

103. The revisions to the Retiree Medical Benefit
Coverages are based on a balanced
multifaceted approach to achieving the future
cost reductions which are necessary to make
these benefits affordable for the churches
and financially viable on a long-term basis.
The design changes will accomplish the
targeted strategic objectives for the post-
retirement medical coverages and ensure the
financial stability and sustainability of these
programs over the foreseeable future.
103