# ELCA Publishing arm kills retirement plan



## Berean (Jan 5, 2010)

> Augsburg Fortress blamed the money problems on fewer book sales, *shrinking ELCA congregations* and increasing competition on the internet.



KSTP TV - Minneapolis and St. Paul - Minneapolis ELCA Publisher to End Retirement Benefits

It appears that people aren't buying what the ELCA is "selling". So now its retirees and soon-to-be retirees get the shaft. So much for liberal compassion. "Sorry suckers, we're keeping your retirement money. Go work at McDonalds" (my paraphrase).


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## Curt (Jan 5, 2010)

But, we've been told the recession is over.

It's true that the economy is still hurting lots of folks. It's not just liberals. My own pay got cut drastically.


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## Notthemama1984 (Jan 5, 2010)

This is why I like to invest for my retirement, not bank on a pension.


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## Jack K (Jan 5, 2010)

It does make you wonder if this was a business decision, made according to the wisdom of this world, or a decision made in accordance with the rules and values of Christ's church.


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## Berean (Jan 5, 2010)

Additional info from the ELCA and _The Lutheran_.

ELCA Publisher's Board Terminates Defined Benefit Retirement Plan - News Releases - Evangelical Lutheran Church in America

The Lutheran - Staff Blog


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## Scott1 (Jan 5, 2010)

All kinds of questions come to mind here.

Was this a traditional defined benefit pension plan?

If so, annual financial reports are disseminated to all holders- ordinarily, based on the newspaper report, stakeholders should have seen this coming.

Why was a "cash balance" or 401(K) 403(B) type plan switched to.

Also, there is often insurance behind these plans so all is not lost.


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## Berean (Jan 5, 2010)

It appears that it was a defined benefit retirement plan which was replaced by a defined contribution 403b plan for current employees. I'm sure that some here have the expertise to understand this far better than I do. Check the links in my #5 post above.


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## Scott1 (Jan 5, 2010)

Okay, so based on the news account, which had some good detail, here's what happened:

The company is liquidating its defined benefit plan. Instead of participants getting a monthly check for life at retirement, everyone will get a presumably much smaller lump sum payment of cash now to "cash it out."

This is because the plan is no longer "viable" due to shrinking profits of the company, and the poor performance of capital they have invested in during the Obama downturn.

This type of plan is old style, funded completely by the company- a promise to pay employees after they no longer work there.

Sometime ago, the company instituted a new plan from employee deductions and employer matches (likely). This money is much more secure and is held in fiduciary status for the employee for retirement or moving out of that employment.

Likely, many former employees who are at or nearing retirement lose over the long run on this. Not newer employees. But, those drawing on it now will get a multi thousand dollar bonus (and a short term tax problem), and be happy... for a while!


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## DMcFadden (Jan 5, 2010)

Reading the original post I was all set to jump on the big bad liberal denom for their bad faith with their employees. Then, I read the second link and my blood ran cold. My own organization is caught in much the same dilemma (although we are handling it differently).

For those who do not speak bean-counting fluently, a "defined benefit" pension is the old fashioned style that promised you benefits at a defined amount or percentage. For example, you can retire at 65% of your average salary over the last five years of active employment. It was quite popular decades ago and carried over in religious organizations longer than it did in industry, probably in part because the for profits pay for expertise to tell them that it would put them out of business!!!

A "defined contribution" plan promises to set aside and invest a certain percentage of your salary and you get whatever it grows to at retirement, ususally in an annuitized form.

In other words, the defined benefit plan puts the risk on the sponsor to pay out regardless of what has been earned in the fund; the defined contribution puts the risk on the employee to get only what the fund has earned.

My predecessors kept a very expensive defined benefit plan which, in the age of bear markets, resulted in accumulations substantially below the obligation to future retirees. Like ELCA, we went to a defined contribution plan several years ago in hopes that we could get out from under the burden while we attempted to earn enough, set aside enough, save enough, whatever, to cover the unfunded liability on the prior plan. Obviously the markets have not been friendly to us and we still have the unfunded liability. We have elected to set aside more in order to keep faith with our obligations to our employees when they retire. 

However, I can certainly understand the conundrum ELCA faces with limited options. You can continue paying out the full obligation to each employee who retires until the system is broke and then declare bankruptcy, shafting all of the younger employees. Or, you can make a proportionate distribution to all employees based upon their percentage share in the fund. This way, everyone suffers proportionally, the older folks don't simply get theirs leaving the younger retirees with nothing when they reach retirement age. 

It is not simply a "business decision" but an attempt to do justice in a lousy situation. If everyone gets 45% or 65% or 85% of what they were owed, then one might argue that it was a "fair" distribution in that it disadvantaged everyone proportionately.

Now, all of our newer employees are ONLY on the defined contribution plan where the outcome depends entirely upon the market, without providing a boom or bust for the provider.


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