About the Pension and Investment Savings Plan (“ISP”) Changes
Effective July 1, 2008, we intend to change the Pension Plan, the Qualified ISP and the Non-Qualified ISP for all future full-time hires, all full-time employees under 40 years of age as of June 30, 2008, and all full-time employees with less than 10 years of service as of that date (“Non-Grandfathered Employees”).
Full-time employees hired prior to July 1, 2008, who are age 40 and over and who have at least 10 years of full-time service as of June 30, 2008 (“Grandfathered Employees”) will have the option to remain in the Pension Plan, but will have ISP contributions transitioned to a new “defined contribution” 403(b) plan (the “New Plan”), as discussed below.
If you are a Non-Grandfathered Employee, the benefit dollars that the Church and Academy have been contributing to the Pension Plan and the Qualified or Non-Qualified ISP for you in addition to your pay (currently 11.3% of salary) will be redirected. We plan to contribute a portion of these dollars (7% of salary) into the new plan. The new plan will be recordkept by American International Group (AIG). Our intent is for the New Plan to be much like the current 403(b) arrangement many of you have established to save pre-tax salary dollars and supplement your retirement income. The main difference is that both you and the Church/Academy will be able to contribute to the new plan. The remaining 4.3% of salary will be automatically added to your 403(b) plan. You will have the option to keep the 4.3% in the plan or remove it and draw it as salary.
Frequently Asked Questions
Please scroll down to view frequently asked questions in the following order:
- Questions Non-Grandfathered Employees may have
- Questions Grandfathered Employees may have
- Other Questions Related to Pension and ISP plans
Questions Non-Grandfathered Employees may have:
What investments will I be able to select under the new plan?
AIG will offer an array of mutual funds for you to choose in the new plan, using dollars contributed by the General Church or Academy and any dollars you put in. We expect that the funds may include such recognizable names as Dreyfus, PIMCO, American Funds and Vanguard. AIG will be available to help you select an appropriate mix of funds depending on your age, risk tolerance and other financial assets.
If you have difficulty selecting what funds to invest in, we also plan to offer various "age-targeted" funds, which are designed to have an appropriate stock/bond mix depending on your planned retirement year. In addition, you should meet with your own financial advisor.
We are currently in the process of selecting funds to be made available. Please watch this site for further information about funds which may be available under the new plan.
How will this affect my current Qualified or Non-Qualified ISP balance?
If you are a Tier 1 Non-Grandfathered Employee, other than a minister or someone based outside the U.S., you currently have assets in the Qualified ISP at Northern Trust. (For definitions of Tier 1 employee and a description of the qualified ISP, please contact the Human Resource Department.) These assets are currently invested 70% in an S&P Index fund and 30% in a broad market bond fund. We plan to move these assets to AIG as part of the new service arrangement with them. We plan to offer you the flexibility to invest your Qualified ISP account in the same array of mutual funds available under the New Plan. Effective July 1, 2008, no further Church or Academy contributions will be made to your Qualified ISP account since all contributions will be directed to the new plan. All other terms of your Qualified ISP are expected to remain the same, including how you access these funds at retirement, vesting, etc.
If you are a Non-Grandfathered Employee who is a minister, you currently have assets in the Non-Qualified ISP, invested within the New Church Investment Fund (NCIF). (For a description of the Non-Qualified ISP, please contact the Human Resource Department.) We will not be moving these assets to AIG as part of the new service arrangement with them. These assets will remain invested within the NCIF. Effective July 1, 2008, no further contributions will be made to your Non-Qualified ISP account since all contributions after this date will be directed to the New Plan mentioned above. All other terms of your Non-Qualified ISP are expected to remain the same.
How will the Pension Plan accrual for Non-Grandfathered employees be impacted?
If you are a Non-Grandfathered Employee and you have vested in the Pension Plan, you will continue to be eligible to receive a pension when you retire but it will be reduced in comparison with the Pension Plan as in effect had this change not been made. (For a description of the Pension Plan, please contact the Human Resource Department.) Generally, based on the planned changes, your pension will be calculated with reference to your earnings for the 5 years prior to July 1, 2008. You will be permitted to earn service credit in calculating your pension for any years you work after June 30, 2008, and you will be permitted to vest if you meet the vesting requirements after that date. A revised calculation of your Pension Plan benefit will be provided to you by the Human Resource Department. Please contact them if you need more information.
We intend to give Grandfathered Employees (as defined above) the option to remain in the Pension Plan (the “Pension Option”) or to transition to participate solely in the New Plan on the same terms as for Non-Grandfathered Employees. If you choose the Pension Option, you will continue to be eligible for a pension under the Pension Plan. However, the benefit dollars the General Church and Academy have been contributing to your Qualified or Non-Qualified ISP in addition to your pay (currently 5% of salary) now will go into the new plan. AIG will be the recordkeeper.
Questions Grandfathered Employees may have:
What investments will I be able to select under the new plan?
AIG will offer an array of mutual funds for you to choose in the new plan, using dollars contributed by the General Church or Academy and any dollars you put in. We expect that the funds may include such recognizable names as Dreyfus, PIMCO, American Funds and Vanguard. AIG will be available to help you select an appropriate mix of funds depending on your age, risk tolerance and other financial assets.
If you have difficulty in selecting what funds to invest in, we also plan to offer various “age-targeted” funds, which are designed to have an appropriate stock/bond mix depending on your planned retirement year. In addition, you should meet with your own financial advisor.
We are currently in the process of selecting the funds to be made available. Please watch this site for more information about funds which may be available.
How will this affect my current Qualified or Non-Qualified ISP balance?
If you are a Tier 1 Grandfathered Employee, other than a minister or someone based outside of the U.S., you currently have assets in the Qualified ISP at Northern Trust. (For definitions of Tier 1 employee and a description of the Qualified ISP, please contact the Human Resource Department.) These assets are currently invested 70% in an S&P Index fund and 30% in a broad market bond fund. We plan to move these assets to AIG as part of the new service arrangement with them. We plan to offer you the flexibility to invest your Qualified ISP account in the same array of mutual funds available under the New Plan. Effective July 1, 2008, no further Church or Academy contributions will be made to your Qualified ISP account since all contributions after this date will be directed to the New Plan. All other terms of your Qualified ISP are expected to remain the same, including how you access these funds at retirement, vesting, etc.
If you are a Grandfathered Employee who is a minister or who was employed by the Church or Academy prior to 1994, you currently have assets in the Non-Qualified ISP, invested within the New Church Investment Fund (NCIF). (For a description of the Non-Qualified ISP, please contact the Human Resource Department.) We will not be moving these assets to AIG as part of the new service arrangement with them. These assets will remain invested within the NCIF. Effective July 1, 2008, no further contributions will be made to your Non-Qualified ISP account since all contributions will be directed to the new plan mentioned above. All other terms of your Non-Qualified ISP are expected to remain the same.
How will the Pension Plan accrual for Grandfathered Employees be impacted?
If you are a Grandfathered Employee that chooses the Pension Option for future benefit accruals, there will be no change to your benefit as defined under the current Pension Plan. (For a description of the Pension Plan, please contact the Human Resource Department.) If however, you opt out of the Pension Plan for all future benefit accruals, your future compensation and benefits will be handled in the same manner as for a Non-Grandfathered Employee. See above for a description of the changes for Non-Grandfathered Employees. You should discuss this important decision with your financial or tax advisor.
Other questions employees may have regarding the Pension Plan and ISP Plans affecting all employees:
Who is AIG and what will they do for me?
We could not make these changes without, at the same time, providing a resource for employees to educate them about their financial future. We have hired AIG Retirement to provide financial counseling and money management services to our US employees. AIG is a large company with a market cap of over $170 billion and assets of almost $1 trillion. They have been in this business for a long time, serving over 26,000 employers representing over 2 million employees, many of them working for schools and churches.
What will AIG do for you?
You will be hearing more about AIG’s services over the next several months.In the meantime, please check the website regularly for information updates or contact the Human Resource Department.
Are my Qualified or Non-Qualified ISP and new plan assets subject to risk?
Your assets are held in retirement trust arrangements which protect them from creditors of the Church, Academy or AIG. Your assets are also broadly diversified in mutual funds which means they are not at the risk of any single company. Your assets are subject to the risks of the financial market so they can decline in value. We urge you to consult with your own financial advisor regarding your investment choices. AIG’s financial planning assistance is also available to construct an investment plan that is right for you.
What happens to my current 403(b) plan at Vanguard, Lincoln, or National?
These changes have no effect on the assets you have accumulated to date in your 403(b) plan at Vanguard, Lincoln or National. Prior to July 1, 2008, we will ask if you wish to transfer these assets over into your 403(b) account at AIG. If you wish to make future pre-tax payroll contributions, these must be made to the new plan. We will no longer be able to permit employees to make contributions to plans at Vanguard, Lincoln or National after June 30, 2008.
There are advantages to combining all of your investments into the New Plan.You will be able to monitor your investments in a single statement and administration of your funds at retirement will be simplified.
May I roll over assets from other retirement plans with past employers into the new plan?
This may be possible, depending on the type of retirement arrangement you had with your past employer. Consult with your prior employer or plan administrator about whether you are able to roll over your assets and how to do it.
How do these changes affect me if I am a full-time employee who previously did not qualify for the ISP?
Full-time Tier 3 employees (please contact the Human Resource Department for clarification) currently do not qualify for the ISP.
If you are a Grandfathered Tier 3 employee and you elect to remain in the Pension Plan for future benefit accruals, you will not be affected by these changes. You will continue to participate in the Pension Plan and the Church or Academy will make no additional employer contributions for you at AIG. You may chose to contribute to the new plan using pre-tax salary dollars. Please consult with the Human Resource Department if you wish to contribute to the new plan.
If you are a Non-Grandfathered Tier 3 employee, the Church and Academy will begin contributing (in addition to your pay) 7% of your salary into the new plan (See above for more information about AIG and the type of mutual funds that will be offered under this Plan). You will continue to be eligible to receive a pension when you retire but it will be reduced in comparison with the Pension Plan as in effect had this change not been made. (For a description of the Pension Plan, please contact the Human Resource Department.) Generally, based on the planned changes, your pension will be calculated with reference to your earnings for the 5 years prior to July 1, 2008. You will be permitted to earn service credit in calculating your pension for any years you work after June 30, 2008, and you will be permitted to vest if you meet that condition after that date. A revised calculation of your Pension Plan benefit will be provided to you by the Human Resource Department. Please contact them if you need more information.
Any Tier 3 Grandfathered Employee who opt outs of the Pension Plan for all future benefit accruals will have their future compensation and benefits handled just like a Non-Grandfathered Employee. See above for a description of the changes for Non-Grandfathered Employees. You should discuss these important changes with your tax advisor.
How do these changes affect me if I am a part-time employee.
Part-time employees may make contributions from pre-tax salary or wages into the new plan.
How do these changes affect me if I am based outside of the U.S.?
All of the aforementioned changes affect US based employees and may also apply to US citizens working abroad. The Human Resource Department and the General Church Treasurer and Financial Office will be working with congregational and/or national treasurers/ administrators outside of the US to determine how these changes may affect their employees.
How do Grandfathered Employees, having the "Pension Option," make the choice to retain pension accruals for years after June 30, 2008?
We will establish and communicate the procedure and timeline for all employees who have the Pension Option to make their choice. Please watch this site for future postings or check with the Human Resource Department.
How will AIG's fees for this service be handled?
The mutual fund companies provided under this arrangement will deduct their normal fees against the employee’s investments in the new plan. You will be able to review the standard fees charged within each mutual fund before you make your investment selection. Currently, the Church and Academy plan to bear the administration fees charged by AIG.
I read the recent (February 2008) press release about AIG's accounting write-down due to major derivatives losses. Is AIG still capable of managing this project?
On February 11, AIG announced that derivatives losses, many of which are tied to the sub-prime mortage crisis, could reach nearly $5 billion. We have been monitoring this and have been in contact with AIG to discuss this issue. We remain confident that AIG is still financially sound and will do an excellent job for us. AIG's response in the press shortly after the market response was that this loss is not expected to affect the organization in a material way (see this Reuters story from Febrary 12 for AIG's response: Reuters Article - AIG Response).
It should be noted that the details provided above in regard to the retirement plans for the Academy and the General Church may change as the Academy and the Church further consider how to best serve the needs of our current employees and retirees. For full details regarding current retirement plans, (including who is eligible), please contact the Human Resource Department. Final details regarding the New Plan will be made available to you as soon as possible.