The WELS Retirement Strategy Committee, a special committee appointed by the Synodical Council several years ago, has announced proposed changes to the WELS retirement program. It is proposed that the WELS Pension Plan be frozen and replaced with a defined contribution plan, wherein all eligible workers would receive contributions to their accounts in the WELS Shepherd Plan.
After an extensive and prayerful study of many options, these changes are recommended because the defined contribution plan will better support our workers and our overall ministry efforts than the current Pension Plan, as well as stabilize costs over time for sponsoring organizations. Here’s more:
How will the retirement program work if the proposed changes take effect?
The sponsoring organization for each worker in eligible service will send a quarterly retirement payment to the WELS Benefit Plans Office, similar to how Pension Plan payments are currently remitted. A contribution will be deposited into the defined contribution plan account—the WELS Shepherd Plan—of each eligible worker on a quarterly basis. The contributions to a worker’s defined contribution plan account will vest immediately at the time the contributions are deposited to the account.
What will happen to earned pension benefits?
Workers will not lose any earned benefits. After a worker’s WELS service ends, the Pension Plan will pay the benefit earned for service performed through Dec. 31, 2020. If a worker dies before he or she begins receiving his or her Pension Plan benefit, the surviving spouse will be able to receive surviving spouse benefits from the Pension Plan.
How much will be contributed to each worker’s defined contribution plan account?
Beginning Jan. 1, 2021, all workers will receive a “base” contribution of $500 per quarter of eligible full-time service.
Workers who are age 44 or older on Jan. 1, 2021, will receive an “additional” contribution per quarter of eligible full-time service besides the base contribution. This is because contributions made to the defined contribution plan account of a worker who is closer to retirement do not have as much time to earn investment returns before the worker retires. Learn more about this at welsbpo.net.
How will contributions to the defined contribution plan accounts be invested?
A worker can choose his or her own fund(s) and/or portfolio from the options available in the defined contribution plan based on the worker’s personal goals. The account of a worker who does not make an investment election will be invested in the default investment option, which will be the target retirement date fund that most closely aligns with the worker’s projected retirement date based on the worker’s age.
Can workers or their sponsoring organization make additional contributions to the defined contribution plan?
Yes, workers can save and invest their own money, and organizations can make additional contributions on behalf of their workers.
Other advantages to workers include immediate vesting, control over investments, and various ways to take distributions. Unlike the pension plan, any assets remaining in the account would pass to beneficiaries upon the death of the worker and spouse.
How much will a sponsoring organization be billed per worker and how will those funds be used?
The quarterly “total retirement payment” charged in 2021 will be the same as the quarterly Pension Plan contribution rates in 2020. The amount needed to fund the contributions to workers’ defined contribution plan accounts will be submitted to the defined contribution plan. The remainder will be used to pay the frozen Pension Plan benefit obligations and the administrative expenses of both plans.
What are the next steps with regards to these proposed changes?
The proposed changes will be a significant topic on the agenda at each district convention in June 2020. A standard resolution will be provided for each district to review, discuss, and vote on during the convention. The plan is for a representative familiar with the proposed changes to attend each district convention. If each district approves the resolution with broad consensus, the proposed changes will likely be implemented on Jan. 1, 2021.
Learn more at welsbpo.net. There you will find a detailed FAQ, a video explaining the changes and the benefits, and a calculator to estimate benefits.
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