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Tenth Biennial Convention of the Evangelical Lutheran Church in Canada
July 21 - 24, 2005
Winnipeg, Manitoba

In Mission for Others
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REPORT OF ELCIC GROUP SERVICES INC. (GSI)

Mission Statement

The mission of GSI is to manage effectively the Pension and Benefits Plans in the best interests of the members, ELCIC and the employing congregations.

This is accomplished by:

  1. Establishing a sound strategic direction and operational framework to manage the plans in compliance with contractual, legislative and regulatory requirements as well as ethical standards.
  2. Providing accurate, timely and friendly administrative services plus effective ongoing communication that meets the needs of members and employers in a cost efficient manner.
  3. Ensuring the Pension Plan investments are managed prudently to maximize long term returns within acceptable risk levels and the plan’s investment policies and objectives.

Board of Directors
The board of directors consists of ten individuals of whom three are ordained ministers and three are laypersons selected by convention for appointment, with the remaining four directors appointed by National Church Council.

Board members that have served since the last convention are:

Rev. Bradford Senften, Chairperson                            Rev. Andrew Paulsen
Mr. David MacIntosh, Vice-Chairperson                       Ms. Yvonne Myrehaug
Mr. Daniel Skaret, Treasurer                                        Mr. Walter Schultz
Rev. Boyd Molder, Secretary                                        Mr. Kurt Von Schilling
Justice Ken Hanssen                                                    Mr. John Wolff

Committees are appointed by the board of directors from among their numbers, in order to gain some depth in discussing issues and provide efficiency to the board meetings. The committees are: Executive, Finance and Audit, Investment, Benefits and Communications. The terms of reference and specific responsibilities are defined in GSI Governance Manual. This manual is reviewed on an annual basis.

The board of directors met for regular meetings in Winnipeg three times in 2003 and three times in 2004. Two telephone conference call meetings were held in addition to the regular meetings.

Description of the Pension Plan

The Pension Plan is a defined contribution plan for clergy and lay workers of the ELCIC, its congregations, related institutions and agencies. It is registered as a Multi-Unit Pension Plan under the Alberta Employment Pensions Plan Act, and the Canada Revenue Agency. The Pension Plan is a Registered Pension Trust as defined in Section 149(1) (o) of the Income Tax Act, Canada.

GSI is the administrator of the Pension Plan. GSI has engaged an executive director and support staff to handle day-to-day administrative matters. GSI has also engaged the services of investment fund managers, as well as a trustee and custodian.

Accounts

A portion of the Pension Plan’s assets is held in the Members’ Accumulation Account (MAA) for the credit of the individual members’ accounts. Currently there are 1,200 member accounts, of which 700 members are actively contributing on a monthly basis. At any point in time, the aggregate individual members’ account balances equal the value of the assets in the MAA.

The Retired Benefit Account (RBA) holds the remaining assets. Prior to July 1, 2003, the Pension Plan entered into annuity contracts with plan members upon their retirement to provide the retirees with a fixed monthly pension income. Currently there are 570 individuals in receipt of a monthly pension. An actuarial valuation is carried out to determine the required reserve for the retirees’ annuity commitments. The assets in the Retired Benefit Account together with the retirees’ annuity commitments make up the retired life portion of the Pension Plan.

It should be noted that plan members at retirement now purchase a life annuity or other approved registered products from a licensed financial institution. Individual counselling is available regarding options, along with various group arrangements for the purchase of a retirement income.

Asset Segmentation

Prior to 2004, the Pension Plan’s assets were held in a single pool, and therefore investment income credited to the MAA and the RBA, as well as management, custodial and administration fees charged, were allocated on a pro rata basis between the two accounts. Effective January 30, 2004, all of the Pension Plan’s individual investment holdings were segmented on a pro rata basis between the MAA and the RBA. Each of the two accounts now holds specific investments under its own separate asset mix policy, and the investment income for each account is determined directly from the particular investments it holds. Expenses are also charged directly to each account based on experience. This allows clearer recognition of the underlying characteristics of each account.

Pension Plan Investment Performance

In 2003, individual member accounts were credited with an investment return (net of expenses) of 9.7%. Given the single pool of assets in 2003, the RBA earned this same rate of return.

In 2004, Jarislowsky Fraser, earned a gross return of 9.2% for its half of the MAA. However the other manager, KBSH, significantly underperformed resulting in a net return of 7.4% being credited to member accounts for the year. Given KBSH’s relatively poor performance over the past several years, the decision was taken to replace them. Effective in March 2005, Phillips Hager & North has taken over management of the other half of the MAA assets.

The RBA earned a net return of 8.5% in 2004, reflecting the fact that at mid-year Jarislowsky Fraser took over management of all bonds and stocks held in the RBA. Mortgage and real estate components have also been added to achieve more stable yearly returns in the RBA.

Unfunded Liability in Retired Life Portion of the Pension Plan

The Actuarial Valuation Report at December 31, 2003 indicated an unfunded liability of $14,691,476 in the retired life portion of the pension plan. This represents the difference between the retirees’ annuity commitments and the RBA assets. It was determined that the supplemental contribution rate of 2% was insufficient to meet the funding requirements and the rate was increased by 4% to a total of 6% effective September 1, 2004. This was communicated to all members and congregations in June of 2003 and reported on at the synodical conventions that year. This is a long term plan that recognizes it will take years to eliminate the unfunded liability.

The Actuarial Valuation Report at December 31, 2004 showed an unfunded liability of $11,697,157. The change in the funded position from the prior year, a net decrease to the liability of $2,994,319, is primarily due to investment returns that were greater than expected and contributions made to the RBA to fund the unfunded liability, which were partially offset by losses on mortality experience.

Pension legislation requires that the funded position of the Pension Plan also be determined on a solvency basis, i.e. as if the Pension Plan were wound-up on December 31, 2004 and retired members’ benefits were settled through a purchase of annuities. Please read the Annual Report of the Pension Plan for more details regarding the valuations.

Group Benefits Plans

All employees of participating ELCIC employers are enrolled in the benefit program (based on eligibility). Coverage includes: life insurance, long term disability (LTD), accidental death and dismemberment (AD&D), employee and family assistance programs (EFAP), extended health and dental coverage (H&D).

The life insurance, LTD, AD&D and EFAP are fully paid by the employer at a combined premium of 3% of salary. The first three benefits continue to be insured with co-operators, while FGI provides the EFAP. However the H&D plan is now insured with Manulife, as the result of a market search completed mid 2003. At that same time, several cost containment measures were introduced. The H&D plan premiums, which may be cost shared with the member based on each Synod’s guidelines, are determined annually based on the claims experience that varies by province of residence. The renewal at January 1, 2004 required an overall increase of 13.3% but the January 1, 2005 renewal had a smaller overall increase of 3.2%.

Communications

GSI publishes three newsletters a year and an Annual Report on the Pension Plan, which are mailed to all members and employers. These are also archived on our website for reference.

Respectfully Submitted:

Rev. Brad Senften, GSI Board Chair
Hildy Thiessen CA, GSI Executive Director

In full communion with The Anglican Church of Canada
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