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Pre-Retirement Seminar with Wespath Benefits and Investments

Join Ronald Theodore at the Florida Annual Conference on September 7th, 2019 for a seminar by Wespath Benefits and Investments on retirement provisions, investing opportunities, housing allowance exclusion, and more.

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Pre-Retirement Seminar with Wespath Benefits and Investments

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  1. Pre-Retirement Seminar Ronald Theodore, Wespath Benefits and Investments Florida Annual Conference September 7th2019

  2. Wespath Benefits and Investments • Not-for-profit organization • Approximately $23 billion in assets under management • 100,000 participants • Wespath maintains the largest reporting faith-based pension fund in the world Caring for those who serve by providing investment and benefit services that honor the mission and principles of The United Methodist Church.

  3. Overview • Retirement Provisions • Wespath Retirement Plans • Investing with Wespath • Housing Allowance Exclusion • Comprehensive Protection Plan (CPP) • EY Financial Planning • Wespath Participant Services

  4. Provisions for Retirement—Book of Discipline ¶357 • Normal Retirement:Age 65 or 40 years of service • Early Retirement:Age 62 or 30 years of service • Mandatory Retirement: Age 72 • 20-year retirement

  5. §415 Compensation Plus Housing Benefits—Plan Compensation Example:

  6. Denominational Average Compensation (DAC) Average plan compensation of clergy serving full-time appointments 2018: $70,202 2019: $71,361 2020: $72,648

  7. Wespath Retirement Plans CRSP 2014+ CRSP UMPIP 2007-2013 CRSP 1982-2006Ministerial Pension Plan (MPP) Pre-82 Plan(Minister’s Reserve Pension Fund)

  8. Clergy Retirement Security Program (CRSP) + Monthly benefit Account balance Defined Benefit(DB) Defined Contribution(DC)

  9. CRSP DB: Service from 2007 – 2013 • Monthly payment, payable for life, calculated by multiplying the following and then dividing by 12: • 1.25% • DAC at time of retirement • Years of credited service from January 1, 2007 until December 31, 2013(7 years if full-time) Example for2019 Retirement $71,361 (2019 DAC) x .0125 x 7 years = $6,244 ÷ 12 = $520 per month

  10. CRSP DB: Service 2014 – June 30, 2019 • Monthly payment, payable for life, calculated by multiplying the following and then dividing by 12: • 1.00% • DAC at time of retirement • Years of credited service from January 1, 2014 until June 30, 2019 Example for2019 Retirement $71,361 (2019 DAC) x .01 x 5.5 years = $3,925 ÷ 12 = $327 per month

  11. CRSP DB: Service 2007 to 2019 2019 Retirement Total benefit: $520 + $327 = $847 per month • Surviving spouse benefit available • Choice of cost-of-living adjustment (COLA) • Reduction for early retirement

  12. CRSP DB: Age 63 Early Retirement 2019 Early Retirement Total benefit: $745 per month $847Full amount for 2019 -$102 12% reduced; reduction of 6% per year =$745Per month In this example the clergyperson does not meet the 40-years-of-service rules

  13. Matching Contributions Participant before-tax, Roth and/or after-tax contributions 1%Match With 1% UMPIP contribution 2%Non-Match CRSP DC UMPIP

  14. CRSP DC • Account balance invested as directed by the participant • Available as cash distributions • Full lump sum distribution • Partial lump sum distribution • Cash installments: • Self-Managed Retirement Income, or • LifeStage Retirement Income • Remaining balance paid to beneficiaries upon participant’s death • Can leave on account until age 70½

  15. Wespath Retirement Plans CRSP 2014+ CRSP UMPIP 2007-2013 CRSP 1982-2006Ministerial Pension Plan (MPP) Pre-82 Plan(Minister’s Reserve Pension Fund)

  16. Ministerial Pension Plan: 1982– 2006 • MPP provides a lifetime benefit upon retirementand a cash account balance • Account balance invested using LifeStage Investment Management • MPP account balance (including accumulated earnings) remains separate from other plan balances and benefits until distributed in retirement

  17. Ministerial Pension Plan Account Balance • As a cash distribution • Other options Life Annuity • Six-life annuities • Percentage increase

  18. MPP Election Options • Annuity is based on 65% of MPP balance—no more, no less • Remaining 35% of balance may be: • Rolled over to UMPIP or other retirement plan • From UMPIP, taken as: • Partial lump sum • Self-Managed Retirement Income • LifeStage Retirement Income • Taken as full cash distribution

  19. Retirement Options:MPP Life Annuity Options 6 Life annuity types % COLA Annual increase

  20. What Is an Annuity? A series of payments Life annuity—benefit payments that last through the participant’s lifetime (or two lives, if joint annuity elected)

  21. Life Annuity Factors • Participant’s age • Contingent annuitant’s age (typically surviving spouse) • 65% of account balance • Type of annuity selected • Percent of annual increase selected(i.e., 0%*, 2%*, 3%*, 4%* or 5%*) • Mortality table (life expectancy) • Wespath annuity payout rate (wespath.org/retirement/mpp) * CRSP DB does not offer a 0% COLA

  22. MPP and CRSP DB Distribution Options: Life and Survivor Annuities Example:

  23. MPP and CRSP DB Distribution Options: Life Annuities Example:

  24. 0% 2% 3% 4% 5% MPP and CRSP DB Annuity: COLA Options* $4,800 $4,200 $3,600 $3,000 $2,400 $1,800 $1,200 $600 $0 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 * CRSP DB does not offer a 0% COLA

  25. Historical Annual U.S. Inflation Rates 8.7% 4.0% 2.8% 2.2% 1.9% -3.3% Past 198 Years Past 100 Years Past 50 Years Past 25 Years Highest 10 Years Lowest 10 Years Sources: 1821-1913 Global Financial Data; 1914-2018 U.S. Bureau of Labor Statistics; Consumer Price Index for All Urban Consumers: All Items (CPIAUCNS), retrieved from FRED, Federal Reserve Bank of St. Louis

  26. Retirement Considerations:MPP • Can leave on account until age 70½ • Annuity options • 0, 70%, 85%, 100% survivor • 0, 2%, 3%, 4% or 5% annual increases • Single Life • Use of 35% of account balance

  27. Wespath Retirement Plans CRSP 2014+ CRSP UMPIP 2007-2013 CRSP 1982-2006Ministerial Pension Plan (MPP) Pre-82 Plan(Minister’s Reserve Pension Fund)

  28. CRSP Supplement One: Pre-82 Plan Pre-82 Defined Benefit Service Money (DBSM) Formula Benefit

  29. Pre-82 Benefit • Lifetime monthly benefit payment • Benefit is the greater of: • Pre-82 Years of Service x Past Service Rate • DBSM account balance converted to annuity • Example: • 10 years x $771 = $7,710 annual benefit / 12 = $643 monthly benefit • $150,000 converts to $8,424 annual benefit • $8,424 / 12 = $702 monthly benefit

  30. DBSM vs. Formula Benefit Example: Past Service Rate Benefit vs. DBSM Benefit 18,000 15,000 $ 842 PSR 12,000 Annual Benefit 9,000 6,000 $643 PSR 3,000 0 2025 2017 2029 2035 2041 2019 2021 2023 2027 2031 2033 2037 2039 2043 2045 Year PSR Benefit DBSM Benefit

  31. Pre-82 Formula Benefit Actuarial Reduction for Early Retirement: ½% per month or portion of a month that retirement begins in advance of Normal Retirement • Example: • Age 61 with 37 years of service • 3 years from normal retirement • ½% per month for 3 years = 18% reduction

  32. Pre-82: Benefit Paid for Life Single Participant • Single-life, no refund • Benefit ceases upon participant’s death Married Participant •Life and 75% to surviving spouse—set by annual conference • Spouse during episcopal appointment, at time of retirement and when beginning benefits

  33. Wespath Retirement Plans CRSP 2014+ CRSP UMPIP 2007-2013 CRSP 1982-2006Ministerial Pension Plan (MPP) Pre-82 Plan(Minister’s Reserve Pension Fund)

  34. What Is UMPIP? • Personal retirement savings plan • Accepts contributions from: • Plan sponsor/employer • Participant • Participant decides amount of personal contributions • Participant directs investments • “Self-manage” • LifeStage Investment Management

  35. Participant Contributions Roth Before-tax Rollovers After-tax

  36. Participant Contributions Roth Before-Tax After-Tax* * This option is available only in UMPIP

  37. Roth Contributions and Earnings Tax-free if: • First Roth contribution was made at least 5 years*prior to withdrawal • Participant is 59½ or older,permanently disabledor deceased • * Unless a rolled over Roth 403b or 401k is a part of your UMPIP. Also, any Roth balances may be takenlast (securing the 5-year qualification) to avoid tax consequences.

  38. Rollovers—Direct or Indirect • Accepted from IRS-Qualified Accounts—such as: • 401(k) Plans • 403(b) Plans • 457(b) Governmental Plans • Traditional IRA* UMPIP • * Roth IRAs and after-tax contributions in IRAs cannot be rolled over Submit Incoming Rollover form

  39. 2019 Contribution Limits Before-tax and Roth combined • $19,000 for 2019 • Additional $6,000 for age 50+ catch-up • Total $25,000 • Total annual employee and employer contributions limited to lesser of $56,000 or 100% of compensation • Future year limits subject to indexingfor inflation

  40. Electing Your Contributions Contribution Election form—before-tax, Roth and after-tax contributions • Percentage or dollar amount • Increase or decrease at any time • Remit form to employer

  41. UMPIP Access • In-service withdrawals at 59 ½ • Hardship loans • Hardship withdrawals • Disability • Separation • Retirement

  42. In-Service Account Access

  43. Distribution Options for Retired and Separated Participants • Leave on account until RMD* • Distribution choices • Full lump sum • Partial lump sum • Cash installments • Self-Managed Retirement Income • LifeStage Retirement Income • At death remaining balance to beneficiaries • * RMD: Required Minimum Distributions

  44. Required Minimum Distributions • Beginning by no later than April 1stof the following year after the participant turns age 70½* • Applies to defined contribution accounts (UMPIP, CRSP and MPP 35%) • Subsequent RMDs each calendar year using prior-year December 31 balances • MPP, CRSP DB and Pre-82 benefits must also begin at this time • See IRS Publication 590 for details * Or retirement, if later (e.g., age 72)

  45. Investing with Wespath

  46. Benefitsof Investing with Wespath • Sustainable investing • Uphold the values of UMC • Diversified investment options • Reasonable investment expenses • No sales charges or commissions • LifeStage Investment Management

  47. Investment Categories and Funds • Inflation Protection Fund • Fixed Income Fund • Extended Term Fixed Income Fund Capital Preservation Funds • Stable Value Fund Income Funds—Bonds

  48. Investment Categories and Funds Balanced Funds—Bonds and Stocks • Multiple Asset Fund (A fund of funds) • 35% U.S. Equity Fund • 30% International Equity Fund • 25% Fixed Income Fund • 10% Inflation Protection Fund Equity Funds—Stocks • U.S. Equity Fund • International Equity Fund

  49. Social Values Choice Suite of Funds For participants with a heightened focus oncompanies’ environmental and social performance Fixed Income Funds—Bonds • U.S. Treasury Inflation Protection Fund • Social Values Choice Bond Fund Equity Funds—Stocks • Social Values Choice Equity Fund

  50. Risk and Return International Equity Fund Social Values Choice Equity Fund U.S. Equity Fund Multiple Asset Fund Extended Term Fixed Income Fund Return* Fixed Income Fund Social Values Choice Bond Fund Inflation Protection Fund U.S. Treasury Inflation Protection Fund Stable Value Fund Risk* * Risk and return are generally correlated

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