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Transcript of Direct Invoicing Task Force. Agenda Timeline of Events Task Force Membership Review current...
Direct Invoicing Task Force
Agenda• Timeline of Events• Task Force Membership• Review current financial collections & future
Conference budgets under current apportionment system
• Direct Invoicing – What?– Why?– How Much?– Other Alternatives?
• Recommendations from Task Force• Other Annual Conference Items• Q&A
Timeline of Events
• 2003 Annual Conference-first discussed• June 2007-Task force formed based upon
Annual Conference Action• September 2007-Present-Task Force
Meetings• Spring 2009-Task Force Recommendations• May 2009-Pre-Conference Briefings• June 2009-Vote at Annual Conference• January 1, 2011-Implementation (if
approved)
Task Force Members• Bishop Swanson• Charlie Harr, Board of
Pensions (BOP) Chair• Sandra Davis, CFA• Rev. Don Nation,
Cabinet Representative to BOP
• Rev. Dr. Chuck Starks, DS
• Rev. Ken Henderlight, DS
• Rev. Dr. Doug Fairbanks, DS
• Rev. Richard Edwards, Dir. of Congregational Development
• Kathy Mays, BOP
• Sue Ann Greene, CFA
• Rev. Walter Weikel, CFA
• Rev. Gary Grogg, CFA• Rev. Linda Bird Wright,
BOP• Rev. Charles Lockerby,
BOP• Norm Sparks, BOP• Patty Muse, BOP
Advisors• John Tate, Treasurer• Ron Matthews,
Executive Assistant to the Bishop
“We can do things the cheap way, the simple way, for the short-term and without regard for the future. Or, we can make the extra effort, do the hard work, absorb the criticism and make decisions that will cause a better future.”
-Mike Rounds
“Leadership requires the courage to make decisions that will benefit the next generation”
-Alan Autry
“Indecision becomes decision with time.”
-Author unknown
“The definition of insanity is doing the same things over and over again expecting a different result.”
-Albert Einstein
Holston Conference
$10
$11
$12
$13
$14
$15
$16
1998 2000 2002 2004 2006 2008
Mill
ions
Apportioned Received
Current Collection System
• Annual Conference Budget adopted each year.
• Conference Treasurer allocates proportionally, based upon total church spending (Table II), an amount due from each church based upon formula adopted by Annual Conference.
• Apportioned amounts due are sent to D.S. • Churches determine the amount that will
be paid or not paid.
Current Reality• The Conference must apportion more than
is needed.• Apportionments are a variable expense for
some churches-cash flow tool.• When churches do not pay 100%, future
apportionments must be increased.• Apportionment payments for benefits can
no longer be treated as an optional payment.
• We are directly invoiced for all benefit costs.
Single Figure Apportionments 2008
• Overall Budget– 25% of churches did not pay 100%– $15.7 million apportioned– $13.4 million received– $2.34 million total apportioned not
received• Pension & Health
– $6.3 million apportioned– $5.3 million received
Current Costs• 100% of pension, life, and disability
costs are paid through Conference apportionments. – $7.6 million will be paid in 2010– $3.5 million apportioned in 2010
• 25% of active health plans and 89% of retiree plans are paid by apportionments– Claims costs are increasing
~$1m/year
Projected Future Costs
• Continued large increases in health costs 5-12% per year
• Future pension costs– Increasing pastoral salaries & housing
allowances (+3.5%/year)– Defined Benefit program (2007)– MPP Annuity rates (Defined Benefit
Component)– Automatic increases in Pre-82 rates
Holston ConferenceApportionments devoted to Health Insurance
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
$5,500
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2009 2011 2013 2015
Tho
usan
ds
Projections
Holston ConferenceApportionments devoted to Pension Expenses
$2
$3
$4
$5
$6
$7
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2009 2011 2013 2015
Mill
ions Projections
Removal of Pre-82 Costs
Total Pension Costs
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
2009 2011 2013 2015 2017 2019 2021 2023 2025 2027
Apportionments Reserves & Investment Earnings
Holston Conference90% Collections
$2
$3
$4
$5
$6
$7
$8
$9
2009 2011 2013 2015 2017 2019 2021 2023 2025 2027
Apportionments Reserves & Investment Earnings
Holston ConferenceProjected Conference Budget-2% Increase
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
2004 2006 2008 2009 2011 2013 2015 2017 2019 2021 2023 2025
Mill
ions
Conference Budget-projects a 2% increase beginning in 2011Pension-Funds projected pension costs assuming actuarial amounts with no increases above 2% Past Service RateHealth Insurance-12% medical increase for 5 years & 5% for next 10 years
Pension & Health Costs
Other Ministry Costs
Projected Conference Budget
Projected Conference Budget
Projected Apportionments
Pension & Health CostsOther Ministry Costs
Holston ConferenceConference Budget-Ministry Funds at 0%
$2
$7
$12
$17
$22
$27
2004 2006 2008 2009 2011 2013 2015 2017 2019 2021 2023 2025
Mil
lion
s
Pension-Funds projected pension costs assuming actuarial amounts with no increases above 2% Past Service RateHealth Insurance-12% medical increase for 5 years & 5% for next 10 years
Projected Conference Budget
Pension & Health Costs
Other Ministry Costs
Projected Apportionments
What is direct invoicing?
Direct Invoicing• Church invoiced for their benefit costs instead
of through apportionments.• Costs must be paid by local church on
monthly basis.• Used by Annual Conferences to insure benefit
programs are fully funded as required by the Discipline.– 65% in South East Jurisdiction – 3 Annual Conferences are considering direct
invoicing @ 2009 Annual Conference
• Direct invoicing is being used by the General Church to collect pension contributions.
Why should we support
direct invoicing?
Expected Outcomes
• Proposed system would fund existing benefit programs.
• No benefit participation=No costs• Aligns costs with source of expense.• Proper reflection of cost of pastoral leadership.• Will indicate potential financial stress of
existing pastoral leadership.• Eliminates churches from unintentionally
funding the costs of the leadership of other churches (pay vs. no-pay).
Small ChurchAverage Attendance 25
Total Apportionment (FSA)
$1,653
Portion of FSA for Pension & Health*
$657
Apportionments Paid-All funds
$826
2008 Payment-P&H $328% Unpaid 50%
Pastoral Leadership PT Local Pastor
Est. Direct Invoice $0*Includes Retiree Program
Medium ChurchAverage Attendance 179
Total Apportionment (FSA)
$46,074
Portion of FSA for Pension & Health*
$18,518
Apportionments Paid-All funds
$0
2008 Payment-P&H $0% Unpaid 100%
Pastoral Leadership Full Time-Elder
Est. Direct Invoice $18,000*Includes Retiree Program
Large ChurchAverage Attendance 592
Total Apportionment (FSA)
$193,626
Portion of FSA for Pension & Health*
$77,822
Apportionments Paid-All funds
$122,933
2008 Payment-P&H $49,411% Unpaid 36.51%
Pastoral Leadership (2) Full Time-Elder
Est. Direct Invoice $37,500*Includes Retiree Program
How will this impact my church?
Direct Invoicing Impacts
• Will impact all churches in a unique manner.
• Depends upon salary and current benefits associated with pastoral leadership.
• May cause churches to evaluate how they can support their level of pastoral leadership (i.e. full or part-time).
• Apportionments for benefits will no longer be a variable expenditure.
Estimated Direct Invoiceper pastoral appointment
CRSP-Defined Benefit
10.4% of pensionable wage
CRSP-Defined Contribution
3% of pensionable wage
CPP 3% of pensionable wages
Health Insurance
$8,200 ¾ time or greater
Health Insurance Blended Rate
• The cost per appointment would be allocated by a charge to determine the amount that would be paid by each church on a circuit.
• Figure includes the amount paid as the church’s portion (35%) of health insurance.
Theoretical Example-SingleChurch Budget Church Budget
(Projected)
Apportionment $18,100 $8,507
Health Insurance (single only)
$2,100 $0
Direct Invoice-Health $0 $8,200
Direct Invoice-Pension
16.4%$0 $7,614
Totals $22,200 $24,321
Theoretical Example-E+1
Church Budget Church Budget (Projected)
Apportionment $18,100 $8,507
Health Insurance (E+1)
$4,536 $0
Direct Invoice-Health $0 $8,200
Direct Invoice-Pension
16.4%$0 $7,614
Totals $22.636 $24,321
Theoretical Example-Family
Church Budget Church Budget (Projected)
Apportionment $18,100 $8,507
Health Insurance (E+1)
$6,444 $0
Direct Invoice-Health $0 $8,200
Direct Invoice-Pension
16.4%$0 $7,614
Totals $24,544 $24,321
Division of costs for a circuit
Charge A Budget (Projected-25%)
Charge B Budget
(Projected-50%)
Charge C (Projected-25%)
Apportionment $2,000 $5,000 $2,000
Direct Invoice-Health
$2,050 $4,100 $2,050
Direct Invoice-Pension
16.4%
$1,903.50 $3,807 $1,903.50
Totals $5,953.50 $12,907 $5,953.50
Estimated Direct Invoice
• Minimum Salary $15,825• Average Compensation $19,885
– These figures include 35% of the cost that was previously paid out of the church budget $2,100-$6,444 per year for the church portion of health insurance.
Are there any alternatives to
direct invoicing?
Alternatives to Direct Invoicing
• Do nothing.• Elimination of funding for Conference
services and related agencies. • Reductions in health related programs
and cost sharing %’s for pastors, retirees, and lay employees.
• Increased apportionments.• Elimination of Single Figure
Apportionment.
How will this impact the Conference
Budget?
Conference Budget Impact
• Eliminates benefit costs from the Conference Budget that are currently apportioned (~$5 m)– Pension (100%)– Health Insurance (25%)
• Allows Conference to focus budget on other ministry and program costs that can be controlled based upon church’s support of these programs.
4 Final Points1. Ensures payment for existing benefit
programs for those that receive the benefits.
2. The budget will isolate items that can be controlled by the Annual Conference.
3. Matches the cost of pastoral leadership with the source of the costs.
4. Direct invoicing appears to be the best alternative to meet the future challenges.
Conference Council on Finance & Administration
(CCFA)• Encouraging churches to pay amounts
apportioned, but recognizing some cannot (will not) pay.
• Reduced Conference spending by 15% in recognition of churches sending less $
• Implemented ~1.5% pay increase January 1, 2009 for some personnel (4% approved by AC)
• Maintained health care costs, and pension expense at 100% of amount approved for 2009.
2010 Recommended Budget
• Recommending:– Same apportioned amounts as 2009 – 0% personnel cost budget increases– Same category totals for ministry groups as
2009 amended– No health insurance increases to budgeted
amounts (4% request from BOP)– No pension budget increases
• Differences between Book of Reports and actual line-item activities.
If the Conference is cutting expenses by 15%, why are our
apportionments not being decreased?
Differences
• Reserves are the first revenue sources used to fund Conference Budget.
• Lower receipts means more reserves are used.
• More reserves used leads to higher future apportionment costs.
• 90 day cash reserve policy is established.
CCFA 2010
• Seeking alternative methods for funding the 2011 Conference budget.– Spending caps– Multiple figures vs. single figure share– Tithe– Others?
• Encouraging churches to support direct invoicing.
Board of Pensions & Health Benefits
• Requested funding of $6.87m• Received apportioned funding of $6.35m
– Pension Programs (adopted by General Conference)• Implementing minimum 2% Past service rate increase
– Health Program (adopted by Holston Conference Board of Pensions & Health Benefits)
• Implementing 4% rate increase for active programs• Short-term-utilizes reserves for 2010• Long-term-evaluating cost share %’s, co-pays, &
procedures covered• Bidding retiree plan based upon amounts funded and
received (rates and plan details mailed to participants in Fall)
Trustees
• Recommending a Conference-wide workers compensation program administered by the Annual Conference.
• Invoiced separately on a monthly basis.
• Effective for renewals after January 1, 2010.
Holston ConferenceConference Payments vs. Receipts
Churches less than 25% in 2008-Full-time Pastor
$44,880
$157,421
$0
$50,000
$100,000
$150,000
$200,000
$250,000
Amount Due
Pension ExpensesMedical Premiums
Holston ConferenceConference Payments vs. Receipts
Churches less than 25% in 2008-Full-time Pastor
$44,880
$157,421
$172,330
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Amount Due
Other Ministry Costs
Pension Expenses
Medical Premiums
Holston ConferenceConference Payments vs. Receipts
Churches paying less than 25% in 2008 with a Full-time Pastor
$44,880
$157,421
$172,330
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Amount Due Paid
Other Ministry Costs
Pension Costs
Medical Premiums
Apportionments Paid
$120,761
Local Salaries Paid $1,021,518
Holston Conference
$0
$20
$40
$60
$80
$100
$120
1973 1977 1981 1985 1989 1993 1997 2001 2005
Mill
ions
Total (Church) $$$$ (Line 76) Total Church Spending CPI Conf Apport. Conf. Apportionment CPI
Holston ConferenceApportionment as a % of Spending
12.00%
13.00%
14.00%
15.00%
16.00%
17.00%
18.00%
19.00%
1973 1977 1981 1985 1989 1993 1997 2001 2005
Avg Attendanc
e
Apportionment per
attendee
Church Spending per
attendee
1997
73,315 $179.00 $1,075.32
1998
73,539 $163.53 $1,057.84
1999
73,836 $183.40 $1,184.05
2000
74,018 $190.00 $1,238.89
2001
76,148 $193.93 $1,244.17
2002
75,644 $199.18 $1,353.80
2003
73,835 $212.08 $1,370.37
2004
74,375 $194.44 $1,448.74
2005
73,956 $201.32 $1,561.85
2006
73,112 $209.37 $1,588.36
2007
71,886 $221.14 $1,726.74
Holston ConferenceApportionments % Collected
84.00%
86.00%
88.00%
90.00%
92.00%
94.00%
96.00%
1973 1977 1981 1985 1989 1993 1997 2001 2005
Apportionments
% Increase in apportionments
2009 $3,502,824.00
2010 $3,502,824.00 0%
2011 $4,203,388.80 20%
2012 $4,833,897.12 15%
2013 $5,317,286.83 10%
2014 $5,849,015.52 10%
2015 $6,375,426.91 9%
2016 $6,853,583.93 7%
2017 $7,196,263.13 5%
2018 $7,484,113.65 4%
2019 $7,858,633.43 5%
2020 $8,079,750.60 3%
2021 $8,308,606.87 3%
2022 $7,004,473.11 -16%
2023 $7,249,629.67 4%
2024 $7,503,366.71 3%
2025 $7,765,984.55 3%
2026 $8,037,794.01 4%
2027 $8,319,116.80 3%
Future Pension Costs-100% receipts