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Reformed Church in America Mid-Atlantic Regional Meeting May, 2013

Reformed Church in America Mid-Atlantic Regional Meeting May, 2013. Briefing on RCA Retirement Plans - Ken Bradsell & Claude Bussieres. RCA 403(b) Retirement Program - Overview. Eligible Participants Mandatory for RCA Ministers of Word and Sacrament Prescribed in Formulary 5 of the BCO

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Reformed Church in America Mid-Atlantic Regional Meeting May, 2013

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  1. Reformed Church in AmericaMid-Atlantic Regional Meeting May, 2013 Briefing on RCA Retirement Plans - Ken Bradsell & Claude Bussieres

  2. RCA 403(b) Retirement Program - Overview • Eligible Participants • Mandatory for RCA Ministers of Word and Sacrament • Prescribed in Formulary 5 of the BCO • Optional for lay employees of adopting employers (e.g. , GSC) • Church Contributions Requirement • 11% of Eligible Pay, minimum of the EBPH ($6,325 in 2013) • Eligible Pay • Base Salary + Housing allowance • If parsonage is provided, 140% of Base Salary • Contributions accumulated with investment return in individual accounts at Fidelity

  3. RCA 403(b) Retirement Program - Overview • Accumulated Assets as of May 15, 2013 • 403(b) plan: $104,694,071 • Retirement plan: $268,320,353 • From data used for Fidelity GAP Statements, approximately: • 1,381 non-retired participants • Average church/employer contribution in 2012 of $5,089 • 2012 EBPH: $6,159 • Average minister/employee contribution in 2012 of $1,640

  4. 2011 Audit • Auditors of the plan, CapinCrouse, provided a qualified audit • Issues • Lack of verification if the correct amount of contributions is paid into the plan • Lack of monitoring that contributions are remitted to the plan • Explanations • Salary information not available • Decentralized process of remittance of contributions to Fidelity – directly from the Church to Fidelity

  5. 2012 Audit - Correction Project • Project initiated to verify and correct where applicable issues identified in 2011 audit • Project scoped with assistance of auditors (CapinCrouse) and legal counsel (Conner Winters) • Request for information sent to all Church treasurers in May, 2012, reminder in July and again in the fall • Information requested for CY 2009-2011 • List of eligible pastors, salary, housing allowance, contributions paid

  6. Correction Project - Findings • Request for information sent to approx. 867 churches • Received 367 responses (42%) • 258 usable responses (29%) • Data carefully reviewed to determine any underpayment • Where no data was provided a church/employer contributions underpayment was estimated • Total estimated reserve for contributions underpayment of $2.3M as of Sept. 30, 2012 • Includes assumed investment earnings • Calculated exactly where data received, estimated for remainders based on data received

  7. Legal Considerations • The RCA 403(b) Retirement Plan is a Church plan under ERISA / IRS Regulations • No legal requirement to review pre-2009 years • Legally the obligation is with each individual church and the classis, NOT with the Board of Benefits Services

  8. Contributions Underpayment - Example • Real Case • Contribution shortfall of more than 10% of contributions owed • In addition, assumed investment earnings must be added

  9. Review of Data Received • Salary, housing allowance, voluntary contributions, church contributions • “Special” situations • Parsonage provided – impact on calculation of the employer contributions • EBPH • Commissioned Pastor • Pastor under contract • Part Time • Employer Contributions • Exact, over, under contributions

  10. Next Steps • The RCA ( BOBS, individual churches, classis) are required to collect underpaid contributions • Next steps (more detailed timeline in Appendix 2): • Data will be requested for churches that have not responded • Internal (Finance & BOBS) process will be implemented to bill and collect the contributions and post to Fidelity accounts of impacted pastors • Invoice churches which owe contributions to the plan • Revise the F/S total reserve for underpayment of contributions

  11. Why is this Important? • To keep the plan compliant with the IRS regulations • A qualified audit impacts the perception of the RCA • Because we care for our pastors – Formulary 5 • Financial wellness at retirement is important • Recently distributed Fidelity retirement GAP statements may have raised questions about financial preparedness for retirement and possibly concerns • Because the RCA retirement assistance fund is limited • People are living longer, thus longer needs for retirement income • Resolution of this problem is an important issue for the RCA, our churches and classis and our pastors

  12. Going Forward • Collection of relevant data to verify the remittance to the retirement plan will an annual process, possibly part of the CRF • Information will be kept with highest level of confidentiality • BOBS and Finance have started to work with Fidelity to monitor more closely monthly remittance to 403(b) Retirement Program • Early detection of potential issues • Assistance to church treasurers to make the process as smooth as possible • Information sessions via webinar, posting of information on RCA-BOBS web site, etc… • What do you need?

  13. Next Audit – As of September 30, 2013 • Unqualified Audit in 2012 • Auditor’s comments and Management Response • By September 30, 2013 Audit • Start collection of unpaid employer contributions owed to the plan • Assessment of collectability of reserve • Adjust reserve amount for: • Amounts collected • Based on new information received • Collectability

  14. Other Business - Past • Fidelity GAP Statements • Distributed last November • Quarterly Fees Levied on Participant Accounts • Effective in 2013, 36 bp annually (9 bp quarterly), down 10% from 2012 • Timing changed from end of each quarter to beginning of last month of each quarter • On employer accumulated contributions only • Assistance Program • Managed by Julie VanderVeen Van Til • Partly paid by quarterly fees levied on participant accounts

  15. Other Business - Future • Investment Committee of the RCA Retirement and 403(b) plans • Continuous monitoring of fund performances and costs • Fidelity Accounts • Change to Fidelity Funds Line up effective June 25, 2013 • One fund removed • Eaton Vance Large Cap Value Fund • Two funds added • Fidelity® Strategic Real Return Fund • Invesco Diversified Dividend Fund R5 Class

  16. Fidelity NetBenefits - Demo http://testdrive.fidelity.com/nbng/login.html?1

  17. Appendix 2 – Next Steps Timeline Communication, Communication… • Letter to all treasurers and Classis executives to communicate next steps and new processes being implemented to monitor compliance of the RCA 403(b) Plan – byMay 31st • E-mail to all treasurers (with copy to classis executives) requesting information for CY 2012 - by May 31st • General Synod – Sessions with Classis Clerks • Letter to treasurers of churches that provided all the necessary information for CY 2009-2011 - by July 31st • Confirmation the right amount was paid into the Minister’s 403(b) account for 2009-2011 • Confirmation of underpayment to the 403(b) account and instructions on how to remediate • Letter all other treasurers - by August 31st • Re-request of the information for CY 2009-2011, or • Need clarification on data already provided • Classis executives will be kept informed • Board of Benefits need your assistance

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