Roughly there are about 100 people in the world that actually understand the United Methodist withdrawal liability for unfunded pension obligations. And that’s if I’m rounding up to the nearest 100. Although I’m pretty knowledgeable about the subject, I’m not sure I’m in this group. Yet, because of the upcoming split in the denomination, there are about 100,000 United Methodist who are now talking like they are experts. This post will hopefully help people understand this pension liability issue in order to have better conversations and a better understanding why one solution may not work for all United Methodist conferences.
Here are the facts:
- The Loophole for Broke Churches? – This part of the Discipline is pretty clear (¶1504.23), if your church is leaving or closing, it shall contribute the church’s share of the Conference liability. One problem…we still allow churches to close that don’t have the assets to pay their share. If that same church decided to leave to another denomination instead of closing, how is this different? The legislation doesn’t differentiate.
- Flexibility in Payment Timing – Under the Disaffiliation rules (¶2553), the payment for the pension liability is due before the church can officially leave the denomination. When a church closes, there is flexibility for when the payments is due. If the church has cash/investments available, they could pay that immediately, but most closing churches will have to wait until their property is liquidated. This may take months, years, or even decades. If that is true for closing churches, would it not also be true for churches withdrawing through ¶2548.2? This is where the idea of a promissory note could play a role where withdrawing churches would only pay when Conferences are billed for unfunded pension obligations…which is pretty rare.
- Flexibility in Allocating Liability – Since the pension liability is directly related to the Years of Service of pastors, the best method of allocating the liability would be by Years of Service. Yet this is not the most popular way of allocating the liability. A conference allocating based on Apportionments is making it more difficult for large churches to leave. A conference allocating based on Pension Direct Bills is making it pretty cheap for churches served by lay pastors, retired pastors, or pastors of another denomination to leave. While calculating based on Years of Service does have its own issues (Years relating to churches closed prior to 2019 or Years not included in Wespath’s reports because the pastor changed membership to another conference), it is by far more fair than the other two methods.
I’m not sure this flexibility was intended when the legislation was voted on. This could cause the UMC a lot of problems when trying to enforce it. The UMC also has a history of selectively enforcing provisions of the Book of Discipline. This is why cooperation throughout the separation is a must if we want to avoid lawsuits. I would hate to see us giving more money to lawyers than to feeding the hungry over the next decade.
- Wespath’s FAQ: https://www.wespath.org/assets/1/7/5857.pdf
- Bruce Blumer’s UM Church Pics: https://bruceblumer.com/category/churches/
Thanks Jeff for the explanations. Using the years of service calculations- what would happen with the retired pastors/spouses of congregations that have discontinued or financially unstable- including nonpayment of apportionments? Where would a Conference draw from to make up this gap? Any idea on how many retired pastors/spouses this might effect?
Hey Randy, we’ve only had one disaffiliation in the Dakotas, and it was fairly hostile. Using the Years of Service, the congregation leaving didn’t question paying the pension liability. I think this is because of the personal connection to their former pastors. So…by using Years of Service instead of apportionments or direct bills, I think you’ll have a higher collection rate from churches. For those that close that are unable to pay, I think our retirees are still covered…at least in the Dakotas. It would take something worse than the Great Recession to cause us problems because of our Funding Plan.