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Presented by theConference Board of Pension & Health Benefits                                                1
April 2012             2
The primary objective of the Changes to the Post-retirement Medical Benefit Programs is     to maintain the retiree medica...
The WMC Board of Pension & Health (the Board)  believes that the Conference and Churches  have a moral and ethical obligat...
There are two components of the WMC Post- retirement Medical Benefit Program 1) Early Retirement Benefit Coverage     -Thi...
    The medical & prescription drug benefit    coverages during early retirement are    provided under the Self-funded Me...
The financial accounting and funding of the     long-term cost liability for the post-   retirement medical coverage durin...
   The medical and prescription drug benefit    coverages during normal retirement are provided    under 2 separate post-...
In addition, a separate Prescription Drug  Insurance Program is also sponsored by the  Conference to provide comprehensive...
1. To complement the WMC Retirement Income   Plan and provide a comprehensive WMC   Retirement Benefit Program with a bala...
3. To honor & fulfill the Church’s prior   commitment to provide Post-retirement   Medical Benefit Coverage to long servic...
6. To encourage and promote normal retirement of clergy and Conference staff at the established normal retirement age (i.e...
1. To retain comprehensive retiree medical and drug  benefit coverages for the existing retired participants  and their co...
4. To achieve the necessary cost reductions for  retiree medical coverages through a balanced  multidimensional approach t...
7. To provide a reasonable balance in the premium funding  or cost sharing levels between the Churches/ Conference  and th...
Beginning in 2013, the Retiree Medical Benefit  Coverage will be- Considered to be a key element of the WMC  Retirement B...
Total Accrued Past Service CostLiability for Eligible Participants(Current Clergy & Conference Staff             $31,497,0...
The 2012 annual funding cost to pay the premium costs for the current Retiree Health Benefit Coverages and amortize the ac...
The average 2012 unfunded cost liability under the current post-retirement health care coverage would be over $80,000 per ...
1. The Cost of the current Retiree Health   Coverage is not financially affordable and   sustainable by the Churches & Con...
The Conference currently pay 85% of the full premium costs for the post-retirement medical and prescription drug coverages...
The retired participants currently pay about 15% of the premium costs for their post- retirement benefit coverage during b...
 For Retiree Coverage- the Participant Premium  Cost Sharing is generally within the 25% to 35%  range. For Retired Spou...
By the payment of 85% of the premium costs for the retiree medical programs, the Conference has insulated both the churche...
The total net premium expense to be paid by the Conference for maintaining the retiree medical drug benefits for early and...
The Conference has paid the annual premium costs from the reserve funding for health care benefits which was established b...
The Reserve Funds will be held exclusively for the purpose of providing future benefits and funding for the long-term cost...
The Reserve Funding level for the WMC Post- retirement Health Benefit Coverages is projected to be $9.4 million in Decembe...
Current Reserve Funding is sufficient to cover the expected funding costs of the modified retiree health coverages for nex...
However, proactive action must be taken in  2013 to implement the approved revisions to  the current Retiree Medical Cover...
The urgency for addressing the funding issues and changing the Retiree Medical Benefit Programs has increased for the foll...
New financial/ accounting standards require that long-term cost liabilities for the retiree medical programs must be recog...
   The number of retirees and spouses covered    under these programs has progressively    increased over the past severa...
A decline in the investment earnings on the  reserve assets has occurred over the past few  years due to economic conditio...
By taking proactive steps to address these issues now, we can maintain the post- retirement coverages indefinitely.The des...
1. The Conference Premium Funding for Retiree Dental & Vision Care Benefit Coverages for all retired participants and thei...
2. Continuation of Post-retirement Medical Benefit Coverage will not be provided to Working Spouses of WMC Retired Partici...
3. The future Premium Funding or Cost Sharing to be paid by the Churches and Conference for retiree medical coverage durin...
4. The future Premium Cost Sharing Levels to be paid by Retired Participants and their covered spouses for the revised med...
5. A Variable Age Related Participant Premium Cost Sharing Schedule will be implemented for the Early Retirement coverage ...
6. A Fixed Annual Limitation on the Maximum Premium Funding or Cost Sharing Level to be paid by the Churches for the futur...
7. The Supplemental Medical Benefit Coverage was revised to a modified comprehensive benefit design with coinsurance featu...
   The premium funding paid by the Conference    for the Retiree Dental & Vision Benefit    Coverages will be discontinue...
   The future focus of the post-retirement    benefit program will be directed towards    maintaining core medical and pr...
   Significant ongoing future cost savings and    reduction in the unfunded cost liability will be    realized by the Chu...
The Retiree Dental Benefit Program will be retained as an optional or voluntary benefit coverage on a self-payment basis b...
The WMC Retiree Medical Benefit has been elected by many Working Spouses of retired clergy who also have access to alterna...
When a Working Spouse with access to alternate group retiree medical coverage elects to continue under the WMC Retiree Med...
The exclusion provision for Working Spouse with access to alternate group retiree medical coverage is designed to- ◦ help ...
This exclusion provision will apply to circumstances where a Working Spouse is also eligible for another group post- retir...
Working Spouses with alternate group retiree medical coverage will not be permitted to continue medical and drug benefit c...
The exclusion for Working Spouses will apply regardless of any variances in the participant premium cost sharing levels an...
The only exceptions to the Working Spouse Exclusion Provisions are that- ◦ the alternate retiree coverage must include bot...
The consolidated cost savings under the WMC Retiree Medical Program for the exclusion of 20 working spouses from the post-...
The minimum age and service requirements to qualify for any premium funding payments by the Conference during early retire...
This means that the maximum potential coverage period for post-retirement medical coverage during early retirement will be...
The Conference will only provide the premium funding for medical coverage of qualified participants and their eligible spo...
The minimum age limit to qualify for any continuation of WMC Retiree medical coverage will be increased from age 55 to age...
The minimum service requirement to qualify for any premium cost sharing payment by the Conference for retiree medical cove...
Service Eligibility Requirements to qualify for  any premium funding by the churches are as  follows- The minimum service...
Retired participants and their covered spouses only pay 15% of the total premium expense for their 2012 post-retirement he...
The future premium cost sharing levels to be paid by retired participants and their covered spouses during both early and ...
The targeted premium cost sharing percentage level to be paid by retired participants and their covered spouses for the su...
For current retirees and their covered spouses, the future participant premium cost sharing level will be increased to 30%...
   Variable Participant Premium Contribution    Schedules will be implemented in 2013 for    future retirements only.   ...
For retiree medical coverage during normal retirement (age 65 & over) the applicable participant premium cost sharing perc...
Based on the future premium cost sharing level of 30% and 2012 premium rates for the retiree medical and drug benefit cove...
Future Variable Participant Premium Contribution Schedule for                       Normal Retirement Only      Credited S...
Premium cost sharing levels to be paid by  participants for medical and drug coverage  during Early Retirement will vary b...
The Variable Participant Cost Sharing Schedule for Early Retirement will balance the future premium funding costs to the C...
The Variable Age & Service Based Premium Contribution Schedule will correlate the participant and dependent premium cost s...
The targeted future premium funding levels to be paid by the WMC for providing medical and drug coverage during early reti...
This Participant Premium Cost Sharing Schedule will be applied formedical and drug coverage during early retirement beginn...
Multiple service based Participant Premium Cost Sharing Tiers will apply for each of the early retirement age levels (i.e....
The future premium cost sharing levels to be paid for the medical and drug benefits during the early retirement coverage p...
The 2012 premium expense for retiree medical and drug benefit coverage under the Self- funded Medical Plan during early re...
For Early Retirement at            Participant will pay Age 60-                             $257.20 per month for 40% prem...
For Early Retirement at   Participant will pay Age 62-                    $192.90 per month for 30% premium cost          ...
The premium cost sharing levels for retired participants and their spouses who are currently maintaining coverage under th...
Premium cost sharing payment levels established for the retired participants and their eligible spouses as of the early re...
A Fixed Maximum Annual Limitation on the future premium funding level to be paid by the Conference for every participant a...
The Maximum Premium Funding Limit by the Conference will be $300 per retired participant and covered spouse per month or $...
The Maximum Funding Limit will apply to the future premium funding to be paid for the medical and prescription drug benefi...
The Maximum Premium Funding Limit will be established to reduce the future cost liability and funding obligations for the ...
Maximum Annual Limit on the Premium Funding to be paid by the Conference will eventually convert the post-retirement benef...
The Maximum Premium Funding Limit will eventually override and supersede the designated premium cost sharing components fo...
   During the transitional period before the    maximum annual premium funding limit is    attained, the designated Parti...
Based on a 7.0% assumption for future medical inflation trend, the Maximum Annual Funding Limit of $3,600.00 per year will...
The intent of the Maximum Premium Funding Limit is to establish a permanent affordable cost liability level for the Church...
The $3,600 Maximum Annual Funding Limit will restrict the future funding liability of the Conference for the medical and d...
However, the Conference’s Maximum Annual Premium Funding Limit of $3,600 may be reviewed periodically in future years to d...
   The Supplemental Medical Benefit Coverage    provided during normal retirement was    revised to a modified comprehens...
The revised Supplemental Coverage includes:   Coinsurance Payment Percentage Levels of 80%    by the Plan and 20% by the ...
The changes to the Supplemental Medical Coverage focus on- ◦ promoting positive consumer driven behavior to   proactively ...
The revisions to Supplemental Medical Coverage resulted in an immediate reduction in the 2012 premium expense level for th...
The change to a modified comprehensive benefit structure has both positive and negative implications for covered participa...
The current retiree prescription drug coverage will be retained to provide comprehensive drug benefits without any coverag...
The funding strategy to be achieved by revising the post-retirement medical benefit programs will reduce the prior unfunde...
This strategy will reduce the annual funding contribution level for the churches & Conference from over $2.4 million for 2...
The 2013 Funding Cost of $776,000 will be allocated as follows: ◦ $420,000 (or 54%) will be paid directly by the   Churche...
The 2013 annual funding expense of $420,000 will be charged to the churches using a funding allocation approach which is b...
This funding allocation process results in a 2013 funding charge of $1500 (i.e. $125 per month) for every full-time clergy...
The revisions to the Retiree Medical Benefit Coverages are based on a balanced multifaceted approach to achieving the futu...
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  • The elimination of post-retirement medical benefit coverage for working spouses with alternate group retiree coverage would apply to future retirement situations only.
  • This revision eliminates the future unfunded cost liability for the five year early retirement coverage period from age 55 to age 60 under the future actuarial valuations.
  • Participants will not be able to continue their WMC medical coverage for early retirements prior to age 58 regardless of their length of credited service with the Conference.
  • The transition to higher premium cost sharing payment levels by retired participants and their spouses was initiated in 2012.
  • Transcript of "Power point presentation of approved 2013 changes fin"

    1. 1. Presented by theConference Board of Pension & Health Benefits 1
    2. 2. April 2012 2
    3. 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 topreserve the long-term financial stability and viability of these programs. 3
    4. 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. 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. 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. 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 andtreated as a separate post-retirement benefit program. 7
    8. 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. 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. 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. 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. 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. 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. 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. 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. 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. 17. Total Accrued Past Service CostLiability for Eligible Participants(Current Clergy & Conference Staff $31,497,000and Retired Participants as ofJanuary 2012)Reserve Funding for the Retiree $9,400,000Health Benefits in December 2012Expected Unfunded Past ServiceCost Liability to be Accrued at $24,327,000December 31, 2012*These cost liabilities are determined by an independent actuary. *includes projected 2012 service accrual and 2012 interest charge 17
    18. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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 Conferencepremium funding) 68
    69. 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. 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. 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. 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. 73. This Participant Premium Cost Sharing Schedule will be applied formedical and drug coverage during early retirement beginning in January2013: Premium Cost Sharing PercentagesFor 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 theireligible spouses) with 30 or more years of credited service at theirearly retirement date. 73
    74. 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. 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. 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. 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 serviceFor 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 2012premium rates for the self-funded medical plan. The future premiumcost sharing payments will be somewhat higher than the illustratedlevels.) 77
    78. 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 serviceFor 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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
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