PHILADELPHIA – The Board of Pensions Healthcare Committee is recommending that the board circulate several possibilities for changing the dues structure of the Presbyterian Church (U.S.A.)’s medical plan – to give Presbyterians a chance to provide feedback before the board makes a final decision in June.
The financial need to do something remains clear. If the board doesn’t change the dues plan, the expected shortfall for 2014 would likely be less than originally projected – coming up $12 million shy of the amount needed, rather than $28 million short. But the deficit would reach about $42 million in 2015 if nothing were done, and the Board of Pensions says its self-insured plan cannot afford to take that big a hit. In recent years, dues collected haven’t covered all expenses – so the board has been cutting into its reserves, a trend it says it cannot continue and remain fiscally responsible.
Last October, the board presented a proposal – referred to as Dues Plus – which would have altered the dues structure. That plan got shellacked by critics who contended it would be too expensive for young pastors with families and for those serving small churches. In discussion March 8, some board members admitted they were surprised by the intensity of those attacks.
So the board announced in February that it would come back with a revision of the Dues Plus proposal. And the board’s health care committee, meeting March 8 in Philadelphia, recommended presenting three proposals for Presbyterians to discuss – with the board to vote which way to go at its meeting June 27-29.
Under the committee’s plan, the board would solicit feedback on the possibilities between now and its June meeting. Forums to collect feedback would include regional benefits consultations April 17-18 in Philadelphia and April 24-25 in Arlington, Texas. They might also include webinars and a special website the board would create to provide information about the proposals.
The health care committee’s recommendation to carry out this plan will be presented to the full Board of Pensions for its consideration March 9.
Here’s how the options compare:
Current plan: The Board of Pensions currently requires churches or other employers to pay 21 percent of a plan member’s effective salary. Those mandatory dues pay for health insurance both for the member and the member’s partner and children. Essentially, that means full coverage for a member’s family with the entire cost borne by the employer – a benefit provided in part out of recognition that salaries for pastors and other church employees tend to be low.
Dues Plus. This is the option presented in October. Mandatory dues would have dropped to 19 percent of effective salary. But that would have covered only 65 percent of the dues for partners and dependents – with the additional 35 percent to be paid by the employer, the plan member or a combination of the two. The board estimated the cost for dependent coverage as about $475 per month for both a partner and children, or $5,700 a year.
Three new options were presented March 8. (The labels given those options here are provisional; the board is likely to call them something else.)
Option A: Increase mandatory dues from the current 21 percent to 23 percent of effective salary, to be paid by churches or other employing organizations. That would produce a fund balance or reserve of $56.4 million in 2014 – or 29.8 percent of total plan expenses (claims and administrative costs). As a self-insured plan, the board has a target fund balance of between 20 to 33 percent of total plan expenses.
In 2015, the board would need to increase revenue by $8.9 million to keep the reserves solid, meaning that mandatory dues would rise to 24.3 percent of effective salary, to produce a fund balance of $57.3 million (29.2 percent of total plan expenses).
Option B: The details of this are still being worked out. Mandatory dues likely would be in the range of 19 to 21 percent. And flat amounts would be charged annually for coverage for dependents and partners.
With dues of 19 percent of effective salary, the flat amount charged in 2014 would be $1,322 annually for coverage for a child or children; $1,642 for a partner; or $2,882 for coverage for both a partner and children. That would produce a fund balance of $51.9 million, or 27.4 percent. In 2015, in order to keep the mandatory dues at 19 percent, the cost for the flat amount coverage would need to increase by 83 percent, to produce a fund balance of $57.3 million (29.2 percent).
With mandatory dues set at 21 percent, the flat amount in 2014 would be $534 for coverage for a child or children; $664 for a partner; and $1,165 for coverage for both a partner and children. That would produce a fund balance of $51.9 million, or 27.4 percent of total plan expenses. In 2015, in order to keep the mandatory dues at 21 percent, the cost for flat amount coverage would need to increase by 199 percent, to produce a fund balance of $57.3 million (29.2 percent).
Where exactly the board will land on this option – likely somewhere in the 19 to 21 percent range – is still being worked out.
Another key point: There would be a “discretionary pass-through” of the flat amounts charged for providing coverage for partners and children. That means a church or other employer could choose to pay either that full amount or some portion of it, or to pass the entire amount on to be paid by the member. That would be worked out at the local level – each employer would decide, perhaps in consultation with the plan member, what to do.
Option C. The mandatory dues would be 21 percent for “member-only” coverage – meaning a member with no partner or dependents, or one whose partner or children could get health insurance from another source (for example, they would be covered under a spouse’s policy with another employer). The mandatory dues would be 23 percent for members who need coverage for their partners or children through the Board of Pensions medical plan. In 2014, that would produce a fund balance of $54.4 million, or 28.8 percent.
In 2015, the mandatory dues would increase to 22 percent for members-only coverage, and to 25 percent for members needing coverage for partners or children. That would produce a fund balance of $57.4, or 29.3 percent.
Option C also would provide for a “discretionary pass-through,” meaning the employer would be obligated to pay the mandatory dues for what would be member-only coverage – and could then choose to pay all or part of the additional cost for providing coverage for dependents, or to pass that cost on the member.
The cost of a 2 percent difference in dues – the difference between 21 and 23 percent in mandatory dues – is expected to be $840 at the proposed minimum effective salary of $42,000 in 2014 and $2,540 at the promised maximum effective salary of $127,000. That’s the amount that either the employer or the plan member or some combination of the two would have to come up with for coverage for a spouse or children.
Option thrown out. The committee decided not to proceed with another possible scenario. In that one, dues would hold in 2014 at their current level of 21 percent. The fund balance would drop to $42.5 million, or 22.4 percent. And in 2015, revenue would need to increase by $37 million, which would mean dues would jump to 26.3 percent of effective salary, bringing the fund balance to $57.3 million, or 29.2 percent.
A consistent part of the debate over how to change the dues structure has been the recognition that, for many small congregations – and more than half of the PC(USA)’s congregations have fewer than 100 members – these additional expenses could mean the difference between being able to afford to call a full-time pastor and having to seek another form of pastoral leadership.
It’s a tough place to be. Some pastors with children say they can’t afford to shoulder the additional costs of health care. And some small congregations – often not paying their pastor much to start with – fear they can’t either.