Presenters: David Adams, ELCA Board of Pensions Mark Borchert, LCMS Concordia Plan Services

1. The impact of the economic downturn on church retirement plans – an update Presenters: David Adams, ELCA Board of Pensions Mark Borchert, LCMS Concordia Plan Services Nov. 30, 2010

2. Agenda • Background • Impact on CBA member plans • As of late 2009 • As of late 2010 • Discussion

3. Background Triggering events • Easy credit • Bursting of the US housing bubble • High default rates on mortgages • Deregulation in the financial industry • Near collapse of major segments of the world financial system

4. Background Investment losses • S&P index lost 57.4% from 10/9/07 to 3/6/2009 • 49% of the loss had been recovered as of mid-November, 2009 • 57% of the loss has been recovered as of mid-November, 2010 but need additional 33% gain to match 2007 high

5. Background Prospects for recovery • Returns of the last 20 months are encouraging • But economic recovery is still weak • High unemployment • High deficits and potential tax increases • Weak lending • Weak housing market • Weak dollar

6. Background Impact on US retirement plans • Investment losses in the $trillions • Liabilities continue to grow, in part due to falling interest rates • Path to recovery • DC Annuity plans • Market recovery / benefit reductions • DB plans • Market recovery / contribution increases

7. Background Who bears the risk?

8. Survey • Questions about • Asset allocation • Investment returns • Funded status • Benefit or contribution changes • Member communication • Other changes • Number responding in both 2009 and 2010 • 10 DC annuity plans • 10 DB plans

9. Survey Participating organizations

10. Survey

11. Comments regarding asset allocation • DC annuity plans are labeled A1, A2, etc. • DC annuity plans invest as follows:

12. Survey

13. Comments regarding asset allocation • DB plans are labeled P1, P2, etc. • DB plans invest as follows:

14. Survey

15. Comments regarding investment returns • For DC annuity plans • 2008 returns ranged from -32% to 11% • 2009 returns ranged from -1% to 25% • 33 month returns ranged from -14% to 23%

16. Survey

17. Comments regarding investment returns • For DB plans • 2008 returns ranged from -32% to -19% • 2009 returns ranged from 16% to 27% • 33 month returns ranged from -15% to 6%

18. Funded ratios

19. Comments regarding funded ratios • For DC annuity plans average funded ratio was • 80% as of 12/31/2008 • 92% as of 12/31/2009 • 97% as of 9/30/2010

20. Impact on DC Annuity Benefits

21. Changes made ─ DC annuity plans • Five of 10 plans reported plan changes • Closed annuity fund to new entrants • Closed annuity fund to new entrants; plan to reopen in mid-2011 • Implemented partial withdrawals • Changed investment consultants • Changed maximum annuity reduction from 5% to 10% for second year of downturn • Seven of 10 plans reported strengthening member communications

22. Funded ratios

23. Comments regarding funded ratios • For DB plans average ABO funded ratio was • 81% as of 12/31/2008 • 94% as of 12/31/2009 • 95% as of 9/30/2010

24. Impact on DB Contributions

25. Changes made ─ DB plans • Two of 12 plans reported plan changes • Closed plan to new entrants • Changed to cash balance style plan • Four of 10 plans reported strengthening member communications

26. Closing • Wrap up • Questions