FCMM Retirement Plan Funding
FCMM currently maintains two retirement plans to help our members prepare for a financially secure retirement: an active 403(b)(9) defined contribution church retirement income account plan and a legacy 401(a) church defined benefit plan (Option A) which discontinued accepting contributions in at the end of 2003.
The active 403(b)(9) plan allows participants to direct the investment of their current contributions, from their employer as well as through their own salary deferral election, into FCMM’s 403(b)(9) investment options, which are subject to gains and losses based on the ups and downs of the market. These include the FCMM managed options (B, C, D, E), American Funds (F), Vanguard Funds (G) and an Adjustable Rate Investment through Christian Investors Financial (H). One of the investment options, the Conservative Growth Fund with Annuity Benefit (Option C), is designed to pay a set interest rate, which may be adjusted by the Trustees of FCMM from time to time. This rate has been set at 3.5% in 2012. Annuitized retirement payments from any of the 403(b)(9) options have a fixed rate of 2% with a current adjustable rate of 3% for a total of 5%. These flexible rates make it possible to ensure funding for Option C in the future. All payments to clergy participants may be received as Housing Allowance. For more information about the 403(b)(9) plan, please refer to the Summary of Important Plan Features.
The second FCMM plan, a 401(a) church defined benefit plan (Option A), is legally distinct and separately funded. This legacy plan was “frozen” at the end of 2003 (i.e. it continues in operation for those who had accounts at that time but receives no additional contributions). It is 73.5% funded as of January 31, 2012, with the legacy plan’s trust assets valued at $64.1 million. The actuarial present value of future benefit obligations (as of January 31) is estimated to be $87.2 million.
Note that the plan was 100% funded before the 2008 downturn in the market. It is estimated that as a result of the recent financial decline most defined benefit pension plans are now underfunded. The plan’s trust had begun recovering some of its 2008 losses; in 2009, the plan’s trust earned 18.1%, and another 13.0% in 2010. 2011 was another difficult year as the plan lost 2.9%. Low interest rates are discouraging saving in general and creating unprecedented challenges for all retirement plans. The current risk/reward environment makes it difficult to make the necessary 6-7% return to fund this plan. Since a defined benefit plan pays a monthly benefit over the life of a plan member, these future retirement obligations will occur many years from now, allowing time to make up the current deficit through investment returns.
Defined benefit church plans do not participate in, or make premium payments to, the Pension Benefit Guaranty Corporation, ("PBGC"), which provides "basic pension benefits" (subject to statutory limits) to participants when certain underfunded plans are terminated or become distressed.
We have no intention at this time to liquidate the plan and expect to have the funds to maintain current earned obligations. We continue to rely on our advisors for the best and safest ways to continue to grow the plan’s trust.
If you have further questions, we are ready to help you at (800) 995-5357 or fcmm@efca.org.
